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India's benchmark indexes on Thursday closed at a two-week low in a broad-based selloff, after the U.S. Federal Reserve signalled that interest rates will remain elevated for longer.

The Nifty 50 closed 0.8% lower at 19,742.35 points, its lowest close since Sept.7, while the S&P BSE Sensex declined about 0.85% to 66,230.24 points.

Both the indexes fell for a third straight session on Thursday, losing as much as 1%. They are also down more than 2% so far this week, after gaining 2% each and hitting all-time highs in the previous week.

"The Fed's reiteration that the rates could remain higher for longer is a concern. That has kind of created negative sentiments for equity markets across the world, including India," said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.

The Fed on Wednesday held key interest rates unchanged as widely expected, but warned that the battle against inflation was far from over.

Higher interest rates dry up liquidity from the markets, increasing the cost of capital.

"Things are not that bad as macros have been pretty strong, earnings growth is decent in India ... (But) there is some amount of cautiousness and profit booking(after the Fed)," added Khemka.

The benchmark indexes have climbed about 9% each so far this year, while the domestically-focussed mid-caps and small-caps have gained about 28% each.

The small-cap and mid-cap stocks fell 1.3% and 0.9% on Thursday, respectively.

Banking and auto stocks were the top losers among sectoral indexes. The bank index and autos fell 1.7% each, while the public sector bank index dropped 2.2%.

Among individual companies, state-run hydropower generation company SJVN slumped 13% after the Indian government proposed to sell up to a 4.92% stake this week.