MUMBAI: India's main index dropped more than two per cent in its biggest one-day fall since late February after a spike in global risk aversion triggered fears of foreign selling at a time of waning confidence in the struggling government.

Weaker-than-expected euro zone PMI was a trigger to pronounced selling in Indian stock markets and the rupee in the afternoon, in a day already marked by concerns about a government auditor report that said the government may have sold coal deposits too cheaply.

Also on Thursday, the Indian government announced a sweeping rollback of a rail fare hike, adding to concerns about the ruling coalition's standing.

Blue chip Reliance Industries lost 4.2 per cent, helping send the main 30-shares BSE index down a provisional 2.5 per cent, its biggest one-day fall since Feb 27.

The Nifty index lost 2.5 per cent.