The broader NSE Nifty 50 index fell 2.93% to 10,805.55 and the S&P BSE Sensex slid 2.96% to 36,553.60. Both at their lowest level since mid-July.

Reliance, which has gained nearly 4.8% so far this month following two mega investments in its retail unit, fell 2.2%.

Tata Consultancy Services dropped 6.7% after the largest minority shareholder in Tata Group said on Tuesday it wanted to separate interests from the autos-to-steel conglomerate, dragging the Nifty IT index by 4.2%.

Analysts said investors feared the government might consider bringing in fresh COVID-19-related restrictions that could hurt businesses. India's finance ministry is reassessing its earlier optimism about a V-shaped economic recovery, according to a report https://www.business-standard.com/article/economy-policy/covid-19-crisis-now-finmin-is-not-so-sure-about-a-v-shaped-recovery-120092400058_1.html.

"The COVID-19 uncertainty is persisting and spreading across countries. That's impacting market sentiments. People were expecting some stimulus from the U.S. Federal Reserve. But, the expectations of the market is not met immediately," said KK Mittal, investment adviser at Venus India.

Shares of Oil and Natural Gas Corp fell 2.5% after a fire broke out at its Hazira gas processing plant in Gujarat on Thursday morning.

Sun Pharma, India's biggest drugmaker by market cap, fell as much as 4% after a voluntary nationwide recall of a diabetes treatment.

Meanwhile, global shares slid and the dollar rose on Thursday due to investor concern about another economic hit from the coronavirus pandemic. [MKTS/GLOB]

By Sethuraman N R