The BSE Sensex and Nifty fell more than 1 percent, retreating from record highs hit earlier in the week. Oil and gas stocks fell as Brent crude surged to nine-month highs amid concerns that escalating violence in Iraq could disrupt oil supplies.
After rising to 25,688.31 in morning trade on the back of positive retail inflation and IIP data, the Sensex fell back to trade lower by 357.29 points, or 1.40 per cent, to 25,218.92 at 1330 hours. Similarly, the National Stock Exchange index Nifty declined 102.10 points, or 1.33 per cent, to 7,547.80 after surging to 7,678.50 in early trade.
In the BSE realty index, DLF was down over 7 percent. The BSE IT index is 0.21 percent higher, with Infosys trading up 0.7 percent.
The 30-share Sensex had gained nearly 110 points in the previous session.
The new government got the best news on the economy in a year on Thursday, as industrial growth rebounded and retail inflation dropped to a three-month low, signs of an economic revival that could offset the threat of patchy summer rains.