The S&P BSE Sensex index fell as much as 242.64 points to 37,238.48 in early trade, and the NSE Nifty benchmark slid to 11,040.65, down 44.75 points from the previous close. Selling in information technology, metal and pharmaceutical stocks dragged the markets lower.
At 9:18 am, the Sensex traded 236.64 points - or 0.63 per cent - lower at 37,244.48, while the Nifty was down 33.10 points - or 0.59 per cent - at 11,052.30.
Top percentage laggards on the 50-scrip index at the time were Zee Entertainment, Yes Bank, Hero MotoCorp, Vedanta, Tata Steel, JSWL Steel UPL and Eicher Motors, struggling with losses of between 1.70 per cent and 3.36 per cent.
Infosys, HDFC and Reliance Industries were the top laggards on the Sensex.
Bharti Airtel shares fell as much as 1.41 per cent in early trade to Rs. 333.05 apiece on the BSE, ahead of the earnings announcement by the telecom major for the April-June period.
Housing Development Finance Corporation (HDFC), ITC and State Bank of India (SBI) will report their financial results on Friday.
Federal Reserve Chairman Jerome Powell cited signs of a global slowdown, simmering US trade tensions and a desire to boost too-low inflation in explaining the central bank's decision to lower borrowing costs for the first time since 2008 and move up plans to stop winnowing its massive bond holdings.
Financial markets had widely expected the Fed to reduce its key overnight lending rate by a quarter of a percentage point to a target range of 2.00 per cent to 2.25 per cent, but many traders expected clearer confirmation of forthcoming rate cuts.
In a news conference after the release of the Federal Reserve's statement, Mr Powell characterised the rate cut as "a mid-cycle adjustment to policy", citing signs of a global slowdown, simmering US trade tensions and a desire to boost too-low inflation. (Read more on first US interest cut since 2008)
Asian shares fell to six-week lows on Thursday and the dollar rose. MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.4 per cent, extending losses for a fifth day to the lowest since mid-June. Japan's Nikkei also fell 0.4 per cent. South Korea's KOSPI slipped 0.5 per cent while Australian shares declined 0.3 per cent.
The Sensex and Nifty indexes had ended 0.22 per cent and 0.29 per cent higher on Wednesday, but finished the month with the worst performance in at least nine months. In July, the Sensex dropped 4.86 per cent and the Nifty plunged 5.69 per cent.