At 11.45 a.m., the Sensex traded 140 points lower at 16,078, while the broader Nifty index declined 45 points and traded at 4,879.
IT stocks (-1.9%) were the biggest underperformers. Infosys and TCS together accounted for the loss of nearly 50 index points on the Sensex. On the Nifty index, Wipro (-2.3%), TCS (-1.9%) and Infosys (-1.65%) were among the big losers.
Energy stocks (-1.4%) fell on account of heavy selling in Cairn India (-3.2%). The stock had seen sustained buying on the back of addition in the MSCI index. Most other group of stocks traded lower.
On the Nifty, 42 of the 50 stocks traded lower. Asian Paints (-3.84%) was the top loser. Steel major SAIL (-3.15%) and public sector lenders like Bank of Baroda (-2.9%) and PNB (-2.7%) also saw selling pressure.
Defensive stocks like ITC (1.3%) gained on risk aversion. Aluminium major Hindalco (1%) extended gains on the back of approval to mine coal from the Mahan block.
Asian stocks extended losses after May's PMI data in China indicated a slowdown in the manufacturing sector. Benchmarks in China and Hong Kong slipped into the red.
Overnight, the Dow closed 0.2% lower at 12,393, capping the worst May in two years. Jobless claims rose to a five-week high and the economy grew at 1.9% in the first quarter, below estimates of 2.2%.
(With inputs from AP)