This is the fourth straight decline for the 30-share Sensex.
The 30-share Sensex opened lower at 35,452.35 points and moved between 35,241.63 and 35,543.89 before settling lower by 156.06 points, or 0.44 percent, at 35,387.88.
The 50-share NSE Nifty closed at 10,741.10, down 60.75 points or 0.56 per cent, its lowest closing level since 10 May 2018, as 37 of its constituents dropped.
Rising global oil prices and the uncertainty over formation of the government in Karnataka played a vital role to drag the markets further.
Foreign portfolio investors (FPIs) net sold shares worth Rs 830.94 crore, while domestic institutional investors (DIIs) bought equities to the tune of Rs 428.92 crore yesterday, as per provisional data.
State-run banks remained under selling pressure on disappointing quarterly results due to a jump in provisions for bad loans. Banking stocks were battered after scam-scarred PNB posted a record loss for the March quarter amid the Government tightening the screws on some senior public sector bankers.More news: Small cap stars buoyed by Ocado's surge on United States deal
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Major laggards were Wipro, HDFC Bank, L&T, Tata Motors, Adani Ports, Bharti Airtel, Asian Paints, Maruti Suzuki, ICICI Bank, Reliance Industries and ITC Ltd falling by up to 1.28 percent. Barring FMCG, which ended with decent gains, all the other sectoral indices closed sharply in the red.
On the other hand, consumer durables rose 1.37%, realty 0.41%, infrastructure 0.28%, capital goods 0.24% and oil and gas 0.08%.
Besides domestic cues, Abhijeet Dey, Senior Fund Manager, Equities at BNP Paribas Mutual Fund said that stock markets in India were impacted by weak U.S. and Asian shares.
Voltas dropped as much as 8.3 per cent in early morning trade after the air conditioners maker on Thursday reported a 3 per cent fall in its consolidated net profit to Rs 194.19 crore for March quarter as compared to Rs 200.47 crore in the corresponding period past year.
The stock of Dena Bank fell 5 per cent, while the Allahabad Bank scrip tumbled almost 9 per cent. Punjab National Bank, which has been under a cloud since February, was down almost 4 per cent. London too shed 0.23 per cent.