Fed Chair Jerome Powell's promise of policy "pain" to contain inflation quashed hopes that the central bank would soften its rate hike stance to prevent an economic slowdown.
The NSE Nifty 50 index was down 2.1% at 17,190, as of 0347 GMT, while the S&P BSE Sensex dropped 2.14% at 57,572.12.
Powell's speech comes at a time foreign investors are returning to Indian stocks after dumping them in the first half, as they look for higher returns amid expectations that major central banks will slow their rate hike cycle.
Rate sensitive realty index was down 2.8%, while the IT index slumped 4.4%.
(Reporting by Nallur Sethuraman in Bengaluru; Editing by Neha Arora)
