Mumbai: The benchmark BSE Sensex and NSE Nifty took a severe beating on Friday triggered by a sharp decline in banking and NBFC stocks, a day after ADB lowered India's growth forecast for this financial year to 7 per cent.

The stock markets witnessed a blood bath amid weak sentiments by Foreign Portfolio Investors (registered as Trusts) who are faced with the crunch of paying higher income surcharge under the Union budget for FY 19-20 presented by Finance Minister Niramala Sitharaman.

Foreign investors have pulled out more than Rs 5,000 crore from the cash segment of Indian equity markets so far in July.

The Sensex shed over 500 points and the Nifty was trading below the 11,450 level amid all the major sectors facing intense selling pressure, auto and PSU bank stocks are the worst-hit.

The stock market started off on a positive note amid strong global cues after signal from a Fed official that the US central bank was on course to cut rate this month-end.

Sensex had risen 130 points and Nifty topped the 11,600 mark in opening trade. But the market took a U-turn by midday and slipped deep into the red.

BSE benchmark Sensex and NSE's Nifty each traded 1 per cent lower at 1300 hours on Friday. The advance-decline ratio on BSE stood at 1:3, indicating that for everyone stock that rose, three declined.

All the Nifty sectoral indices were trading in the red. Nifty Auto index slipped the most 2 per cent, while Nifty PSU Bank was down 1.8 per cent.

In the broader market, the S&P BSE MidCap index was hovering around 14,224 levels, down 139 points, or 0.97 per cent, and the S&P BSE SmallCap index dipped 165 points, or 1.21 per cent, to 13,393.