The NSE Nifty 50 index closed down 1.08% at 15,080.75, while the S&P BSE Sensex settled 1.16% lower at 50,846.08.
"Today's move is in line with world markets sparked by rising (U.S. bond) yields and we are seeing some correction," said Anita Gandhi, director at Arihant Capital Markets in Mumbai.
The MSCI world equity index slipped 0.5%, as concerns about rising U.S. bond yields triggered another market rout after roiling global stock markets last week.
Indian shares had recovered from the previous week's sell-off at the start of the week, thanks to positive news around the country's COVID-19 vaccination drive and upbeat domestic economic growth data.
However, 12 of the 14 major nifty sub-indexes finished Thursday's session in the red.
The Nifty metal index slipped the most, closing down 2.13%, erasing some of the meaty gains notched earlier this week. It is, however, up more than 22% this year.
Private sector lenders HDFC Bank and Housing Development Finance Corp were the top drags to the Nifty, slipping 2.2% and 2.7%, respectively.
The private-sector bank index ended a three-day rally, to close down 1.27%. Still, the index is up 3.4% this week.
However, the Nifty media index closed up 1.6%, led by a 4.18% gain in cinema hall operator Inox Leisure while peer PVR added 3.71%.
The Nifty's Smallcap100 and Midcap 50 indexes extended gains to close up 1.17% and 0.49%, respectively. Both have advanced about 20% each so far this year, outperforming the benchmark index.
(Reporting by Chandini Monnappa in Bengaluru; Editing by Ramakrishnan M.)