Equity benchmark BSE Sensex tumbled 260 points on Friday, dragged by losses in banking and financial stocks as RBI's rate cut and other measures to prop up the economy failed to meet market expectations.
After falling over 450 points during the day, the 30-share index ended 260.31 points or 0.84 per cent lower at 30,672.59.
The broader NSE Nifty too settled 67 points or 0.74 per cent down at 9,039.25.
Axis Bank was the top laggard in the Sensex pack, plunging more than 5 per cent, followed by HDFC, Bajaj Finance, ICICI Bank, Tata Steel, Bajaj Auto, HDFC Bank and IndusInd Bank.
On the other hand, M&M, Infosys, Asian Paints, UltraTech Cement and Tech Mahindra were among the gainers.
Earlier in the day, the Reserve Bank of India (RBI) unexpectedly slashed benchmark interest rates to their lowest levels since 2000 in an effort the revive the economy.
The repo rate was cut by 40 basis points to 4 per cent and the reverse repo rate was decreased to 3.35 per cent from 3.75 per cent.
The central bank also extended the three-month moratorium on loan repayments till August 31 and raised the limit on banks' group exposure to companies.
"However, RBI has not announced any relief on the restructuring of loans to address the risk of rising asset quality issues in the banking sector which has come as a disappointment for the equity markets," said Gaurav Dua, Sr VP, Head Capital Market Strategy & Investments, Sharekhan by BNP Paribas.
Along with the adverse impact of COVID-19 pandemic, the additional concerns related to US-China brinkmanship is creating uncertainties and accordingly, equities are expected to remain volatile with negative bias in the immediate term, he added.
India witnessed the biggest single-day spike with 6,088 COVID-19 cases, taking the tally to 1.18 lakh. The death toll rose to 3,583, according to the health ministry.
Globally, the number of cases linked to the disease has crossed 51 lakh and the death toll has topped 3.32 lakh.
Hong Kong led a sell-off across Asian equities after China introduced proposals to enact a national security law for the city.
Bourses in Shanghai, Tokyo and Seoul ended significantly lower.
Stock exchanges in Europe were trading on a negative note in early deals.
International oil benchmark Brent crude futures slipped 4.38 per cent to USD 34.48 per barrel.
On the currency front, the rupee depreciated 34 paise to provisionally close at 75.95 against the US dollar.