Soon after opening the 30-share Sensex touched fresh 15-month high but collapsed by 300 points in no time.
It was said that some technical glitches occurred due to heavy profit booking by too many traders at the same time.
The 50-share Nifty hit its lower circuit after it went down by over 900 points to a low of 4,888.
"The market at BSE is working fine and trading members are informed that there are no issues technical or otherwise at BSE," BSE said in a statement.
Rising for the fifth straight day, the 30-share Sensex touched fresh 15-month high after the government unleashed a second wave of reforms on Thursday deciding to open the pension sector to foreign investment and raising FDI cap in insurance.
The BSE benchmark index, which has gained over 488 points in the past four sessions, rose by 27.96 points, or 0.15 per cent, to 19,086.11 points.
The wide-based National Stock Exchange index Nifty, edged up by 5.35 points, or 0.09 per cent, to 5,793.05.
Brokers said continued by funds and retail investors after the government decided to open the pension sector to foreign investment and raising the FDI cap in insurance to 49 per cent from 26 per cent, undeterred by opposition to its decisions on FDI in retail and threats to block these legislations.
In Asian region, Japan's Nikkei was up by 0.42 per cent, while Hong Kong's Hang Seng gained 0.32 per cent in early trade today.
The US Dow Jones Industrial Average had ended 0.60 per cent higher in yesterday's trade.