Indian equity benchmarks suffered sharp losses on Wednesday amid continued selling pressure in financial and pharmaceutical stocks, tracking weakness across global peers ahead of the outcome of the US central bank's policy review.

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The S&P BSE Sensex index and the broader NSE Nifty50 barometer were on course to end lower for a third straight session, a day after the International Monetary Fund (IMF) lowered its growth forecast for India.

The IMF forecast India's economy to grow 9.5 percent in 2021, three percentage points lower than its earlier forecast, citing a lack of access to vaccines and renewed waves of Covid-19 cases.

The Sensex fell as much as 776.03 points or 1.48 percent to 51,802.73 during the session and the 50-scrip benchmark slid to as low as 15,513.45, down 233 points or 1.48 percent from its previous close, before recovering some of those losses in afternoon deals. Analysts awaited more earnings reports from large caps for domestic cues.

At 12:21 pm, the Sensex traded 421.25 points or 0.80 percent lower at 52,157.51 while the Nifty50 was down 119.25 points or 0.76 percent at 15,627.20.

"Today's decline is largely due to the correction in global markets. While the earlier underperformance in the Indian market was restricted to the banking pack, the recent weakness in pharmaceuticals is adding to pressure caused by profit booking. ," Ajit Mishra, VP - Research at Religare Broking, told CNBCTV18.com.

Dr Reddy's was the top laggard on both benchmarks, trading 2.99 percent lower. The Nifty Pharma index traded 0.64 percent lower, having slumped as much as 1.60 percent earlier, as selling pressure continued in the sector a day after the drug major's Q1 performance disappointed Dalal Street.

"The pharma pack may continue to be under pressure in the short term, however, it looks positive from a long-term perspective," Mishra said.

NTPC, Axis Bank, M&M, Cipla, Kotak Mahindra Bank, HDFC Bank, Tata Motors, Power Grid and SBI were among the other worst-hit components in the Nifty50 universe, trading between 1.60 percent and 2.03 percent lower.

On the other hand, Bharti Airtel, SBI Life, Divi's Labs, IndusInd Bank, HUL, Bajaj Finserv, and Titan - up between 0.63 percent and 3.38 percent - were among the blue-chip gainers.

"Nifty50 has been hovering in the band of 15,450-15,900. FIIs' withdrawal of funds in the cash market is causing short-term profit-taking," Mishra added.

Analysts also weighed the pace of vaccinations against the number of Covid-cases, and the impact of the pandemic on the economy.

India logged 43,654 fresh coronavirus cases taking its tally to 3,14,84,605, while 640 more fatalities pushed the death toll to 4,22,022, Union Health Ministry data showed on Wednesday.

Barring the FMCG gauge, all sectoral indices on NSE traded lower. Banking and financial services shares were at the forefront of the selloff.

The Nifty Bank and Nifty Financial Services indices traded 1.48 percent and 1.19 percent respectively, while the Nifty FMCG gauge eked out a gain of 0.05 percent. The Nifty PSU Bank index was down 2.07 percent and the Nifty Private Bank barometer down 1.19 percent.

Broader markets also declined in line with headline indices, with the midcap and smallcap gauges down 0.80 percent and 1.02 percent in afternoon deals respectively.

"Amid nervousness over the Chinese tech crackdown and Fed meeting, domestic bourses witnessed a broad-based selloff... Globally, the Fed’s comment on economic recovery, inflation and monetary policy may provide a timeline to tampering, which will determine the near future of market mood," said Vinod Nair, Head of Research at Geojit Financial Services.

Market breadth remained in favour of bears, as 1,129 stocks traded higher against 1,973 that succumbed to negative territory.

NSE's India VIX index, which gauges the expectation of volatility in the near term, traded 8.33 percent higher at 14.34, having surged to as high as 20.79 earlier on Wednesday.

Maruti Suzuki, Nestle India, and Pfizer were among the companies slated to report their quarterly results later in the day.

Maruti Suzuki shares quoted 0.31 percent lower at 7,219.25 ahead of the earnings announcement, after falling as much as 1.54 percent earlier in intraday trade.

Equities in other parts of Asia remained at seven-month as markets continued to digest the storm in Chinese shares. The dollar rested with traders reluctant to place large bets ahead of the outcome of the Federal Reserve meeting.

European shares started the day on a positive note, with the United Kingdom's FTSE benchmark last seen up 0.06 percent in early trade, while France's CAC was up 0.19 percent and Germany's DAX 0.16 percent.

The S&P 500 futures traded 0.07 percent lower, indicating a muted start on Wall Street later in the day.