Indian shares dropped nearly 2% on Friday to register a weekly decline, dragged by a sharp fall in technology and automobile stocks following a broader global selloff over recession worries.
Forty-eight of the NSE Nifty 50 stocks ended lower, pulling the index down 1.94% to close at 17,530.85. The S&P BSE Sensex was 1.82% lower at 58,840.79. Both the indexes posted a weekly loss of over 1.5%.
"The IT sector is pretty much mirroring declines in the U.S. market and the U.S. tech index and this signals the continuation of a downtrend. I think over the next week because we are heading into the Federal Reserve meeting, global markets would remain under pressure," said Rohit Srivastava, founder and market strategist at Indiacharts.
The domestic IT industry takes a direct hit from rate hikes in the U.S. and Europe as economic activity in those regions, where the tech sector gets most of its revenue from, could slowdown and that is the risk investors are considering, Srivastava added.
The Nifty IT index logged a weekly decline of 7%, its biggest since mid-June. The Nifty automobile index declined 2.7% on Friday.
Among heavyweights on the Nifty 50 index, automakers Mahindra and Mahindra Ltd, Tata Motors Ltd and IT services majors Tata Consultancy Services Ltd and Infosys Ltd fell over 3% each.
Vedanta tumbled 7.5% after the conglomerate clarified that new chipmaking project in the western Indian state of Gujarat will not be run by the miner, but by its holding company Volcan Investments.
Globally, equities fell on fears of aggressive tightening by the Fed in the face of warnings of a global recession from the World Bank and the International Monetary Fund.
Rating agency Fitch earlier this week cut India's gross domestic product growth forecast for the current fiscal year to 7% from 7.8%, citing a slowdown triggered by global economic stress, elevated inflation and tighter monetary policy.