A weakening trend on other Asian bourses in line with losses in the US market also triggered selling in the domestic market.

The 30-share BSE index, which gained over 361 points in the previous two sessions, declined by 125 points, or 0.77 per cent, to 16,050.86 in opening trade.

In a similar fashion, the wide-based National Stock Exchange Nifty index shed 31.65 points, or 0.65 per cent, to 4,829.30.

The BSE IT sector index fell the most, losing 4.85 per cent to 5,549.36 as Infosys Ltd stocks plunged by 6.05 per cent to Rs 2,655, Tata Consultancy Services shed 3.62 per cent to Rs 1,096 and Wipro lost 3.72 per cent to Rs 386.50.

Brokers said fresh selling by funds, mostly of a profit-booking nature, and the cautious approach adopted by market players ahead of the release of IIP data for November later in the day dragged down the Sensex.

They said even a 33.25 per cent increase in Infosys Ltd's net profit for the third quarter ended December 31, 2011, failed to boost the trading sentiment.

Meanwhile, in the Asia region, Hong Kong's Hang Seng Index fell by 0.44 per cent and Japan's Nikkei Index by 0.36 per cent in early trade today. The Dow Jones Industrial Average in the US ended 0.10 per cent lower yesterday.

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PREOPEN

Software bellwether Infosys Ltd, which reports quarterly earnings before trading begins, should set the trend for Indian shares on Thursday, with industrial output also watched for direction.

Infosys is expected to post a 30 per cent rise in December quarter profit, with margins helped by a weaker rupee, but investors will be focusing on the outlook for outsourcing and any revision in full-year forecast.

Alex Mathews, head of research at Geojit BNP Paribas Financial Services, said Housing Development Finance Corp , which also reports quarterly earnings on Thursday, is not expected to show any surprise.

Industrial production in November probably rose at an annual rate of 2.2 per cent, boosted by a rise in infrastructure sector output and auto sales, a Reuters poll showed. The data is due around 11 a.m. (0530 GMT). Output contracted 5.1 percent in October..

Infrastructure sector output, which contributes more than two-thirds of industrial output, rose at an annual rate of 6.8 percent in November, government data showed last month.

Diversified ITC, the country's largest cigarette maker, will be watched after a senior executive said the company expects growth in its food business to ease in the coming fiscal year, in line with the industry, and plans to increase prices as food inflation remains high.

Asian shares were subdued and the euro hovered near a 16-month low on Thursday as worries about euro zone sovereign funding kept investors risk-averse ahead of a Spanish debt sale that is seen as a key test of confidence.

At 0202 GMT, the MSCI's broadest index of Asia Pacific shares outside Japan was up 0.04 percent, while the Nifty India stock futures in Singapore were little changed, pointing to a flat opening for the domestic market.

STOCKS TO WATCH

* Reliance Communications, after a source said the telecoms company is in talks with China Development Bank for a loan to redeem a $925 million convertible bond maturing in March.