The BSE benchmark Sensex Tuesday plunged over 150 points to slip below the 39,000-mark in early trade amid capital outflows by foreign funds and mixed global cues.
However, a strengthening rupee and global crude oil prices restricted further losses in equity markets, brokers said.
The 30-share index dropped 154.60 points, or 0.40 per cent, to 38,912.73 in early morning trade, after touching a high of 39,068.67.
Similarly, the NSE Nifty declined by 19.75 points, or 0.44 per cent, to 11,703.30.
Top losers in the Sensex pack include Yes Bank, IndusInd Bank, Sun Pharma, HeroMoto Corp, and Maruti.
On the other hand, the gainers in the lot include HCL Tech, HDFC Bank, Asian Paints, Infosys, Hindustan Uniliver, Axis Bank and ONGC.
On Friday, the Sensex closed 336.47 points, or 0.87 per cent, higher at 39,067.33. The NSE Nifty too ended 112.85 points, or 0.97 per cent, up at 11,754.65.
Domestic equity markets were closed Monday due to elections in Mumbai.
Meanwhile, Chinese manufacturing sector index fell in April to 50.1, compared to 50.5 in previous month, according to the data released by the National Statistics Bureau.
The US equity indices touched a record high Monday on strong gross domestic product data, which grew at 3.2 per cent in January-March period this year.
Foreign institutional investors (FIIs) emerged as net sellers in the capital markets on Friday, pulling out Rs 70.73 crore, while domestic institutional investors (DIIs) bought shares to the tune of Rs 920.88 crore.
The rupee appreciated by 32 paise to 69.70 against the US dollar in opening trade Tuesday.
Brent crude futures, the global oil benchmark, fell 0.22 per cent to trade at USD 71.88 per barrel.
Elsewhere in Asia, benchmark equity indices in Tokyo and Seoul were trading lower, while Shanghai index surged higher. Investors remained cautious over US Federal Reserve policy decision due Wednesday.