The Chinese yuan broke below the psychological 7-per-dollar threshold after U.S. President Donald Trump abruptly decided on Thursday to slap 10% tariffs on the remaining $300 billion in Chinese imports. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.7%.  .

The Indian rupee hit its weakest level since Mid-May at 70.49 rupees per dollar.

Domestic investor sentiment in equities, which seemed to be upbeat on Friday after reports said the government was looking into foreign portfolio investors' tax concerns, returned to being bearish due the escalating trade war.

The broader NSE index was down 1.62% at 10,819.55 as of 0447 GMT, while the benchmark BSE index was 1.55% lower at 36,537.09.

"The economy is in doldrums and steps taken won't give a boost in the short-term. The global economy is also doing much better than the domestic economy," said Madhumita Ghosh, Associate Dean at Tasmac Global Solutions.

"We don't see any trigger for markets to go up in the short term."

Most sectors were trading in the red.

The Nifty public sector bank index plummeted as much as 5.12%, while the metals index sank as much as 3.9%, their lowest in over three years. The Nifty autos  index slithered down about 1.9%.

Nifty IT was the only index trading higher, boosted by the weak rupee.

The India volatility index shot up as much as 16.16%, its highest in over two months.

Yes Bank was the top loser among the Nifty stocks and fell about 6.7%, while Tata Motors was down 4.7%.

Among the few gainers were Tata Consultancy Services , up 1.4%, and Infosys Ltd, which rose 0.5%.