Markets were trading near their day lows, tracking fall in overnight global markets and Asia, as the weakening rupee coupled with the MET department's forecast of deficient monsoon rains dampened investor sentiment.
At 11:40AM, the 30-share Sensex was down 187 points at 17,037 after touching an intra-day low of 17,027 and the 50-share Nifty was down 60 points at 5,167.
In the broader markets, the BSE Midcap index and the Small-cap index were both down nearly 0.5% each.
Adding to the macro woes, the India Meteorological Department (IMD), for the first time, officially hinted at a drought-like situation, saying the southwest monsoon over India in 2012 is likely to be deficient at below 90 per cent of the Long Period Average.
The rupee fell to a one-week low in early trade on Friday as global risk assets retreated after the European Central Bank indicated willingness to buy government bonds but set conditions that disappointed markets.At 9.08 a.m., the rupee fell to 56.10/11 to the dollar versus its last close of 55.84/85. It fell to as low as 56.18 to the dollar, its lowest since July 26.
Asian shares eased on Friday as the European Central Bank, after inaction from the Federal Reserve, disappointed markets looking for an imminent move to deal with the euro zone debt crisis, spurring risk aversion. Except for the Shanghai COmposite which was marginally up all other indices were trading 0.5-1% lower.
Among the sectoral indices, Metal, Capital Goods and rate sensitive sectors were among the top losers down 1-2% each.
Metal shares were trading lower after the metal gauge on the London Metal Exchange, LMEX ended 1.3% lower on Thursday. Tata Steel, Hindalco and Sterlite were down 3% each.
In the capital goods segment both L&T and BHEL were down 2% each.
Bank shares were down on concerns that lower lending rates would hurt margins going forward. SBI has recently announced cut in home and auto loan rates. SBI, ICICI Bank and mortgage lender HDFC were down 1-2% each.
Auto shares were down on concerns of slowdown in sales growth in the wake of rising fuel prices and high interest rates on auto loans. Mahindra & Mahindra, Tata Motors, Maruti Suzuki, Bajaj Auto and Hero Motocorp were down 1-2% each.
Realty shares were down on concerns of high inventory levels as home buyers are reluctant to purchase new homes because of high realty prices and interest rates on home loans.DLF, HDIL, Sobha Developers, Indiabulls Real Estate were down 2-5% each.
Among other shares, Jet Airways was trading higher by 2.2% at Rs 379, extending its 15% rally in past four-trading sessions, ahead of its first quarter financial results scheduled to be announced later today.
Glenmark Pharma was trading higher by 4% at Rs 401 after reporting a 20% year-on-year (yoy) growth in its consolidated revenues at Rs 1,040 crore for the quarter ended June 2012, on back of strong growth registered by its generic business. Revenue from the generics business grew 58% at Rs 530 crore on y-o-y basis.
The broader market was weak with 1,427 losers and 898 gainers on the BSE.