The Bombay Stock Exchange benchmark Sensex tumbled at mid-session on Friday as shares, mainly in the banking sector, fell on concern that recent cuts in interest rate might have a negative impact on earnings of banks.
The Sensex, which had opened lower by 219 points, fell further to record a fall of 375.66 points to 17,359.02 as banking heavyweights like State Bank of India, ICICI Bank and HDFC declined sharply.
The banking index was the second-biggest loser among 18 sectoral indices on the BSE. The index fell 2.1 per cent at 10,209.67.
Major PSU banks like SBI, Canara Bank and Bank of India have cut lending rates in the past few days.
Wide-based National Stock Exchange's Nifty dropped by 91.50 points to 5100.30 at 1300 hours.
Besides banking stocks, other leading scrips like Bajaj Auto, Reliance Industries, Tata Steel, Larsen and Toubro, Tata Consultancy Services and Ingfosys Technologeis fell sharply.
The market also remained under pressure as major Asian indices traded lower on renewed fear of the US entering into a recession.
Among the factors back home, inflation rate rising to 4.35 per cent for the week ended February 9 might also have affected the investors' sentiment. Inflation stood at 4.07 per cent in the previous week.