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Indian equity benchmarks on Wednesday extended their slump for the fourth straight session amid volatility in global financial markets.

The indices opened higher to later give up all of their gains as investors awaited the US inflation data, which is expected later in the day.

For fresh cues, investors would keep an eye on India's inflation for April, which is expected to be released on Thursday.

Sensex dropped 276 points, or 0.5 per cent, to settle at 54,088 points, whereas the Nifty dipped 73 points, or 0.5 per cent, and settled at 16,167 points.

Nifty auto and IT indices were some of the major losers on Wednesday, NSE data showed.

"While we did see a sharp recovery in indices during afternoon trade, the market breadth was very weak with several stocks in the broader market taking a big knock-on selling pressure as the Small-Cap Index lost 3 per cent today," said S. Ranganathan, Head of Research at LKP Securities.

Inflation will continue to be elevated but the chance of major reactions is low because it has been factored in by the markets, said Vinod Nair, Head of Research at Geojit Financial Services.