The key domestic indices tumbled around two and half percent. The Sensex closed below 40,000 mark while the Nifty settled 11,700 level.
The BSE 30-share index, Sensex, lost 1066 points or 2.61 percent to settle at 39,728. The NSE Nifty-50 index also fell 291 points or 2.43 percent to end at 11,680.
The broader market at BSE also declined but outperformed the Sensex. The BSE Mid-Cap index depreciated 1.75 percent and the BSE Small-Cap index slipped 1.45 percent.
Barring Asian Paints, which inched up 0.3 per cent, all Sensex constituents closed in the red.
Bajaj Finance was the top loser, tumbling 4.7 per cent, followed by Tech Mahindra, IndusInd Bank, ICICI Bank, SBI, Reliance Industries, Bharti Airtel and HCL Tech.
All sectoral indices closed lower, with BSE telecom, bankex, energy, finance, teck and IT indices plunging as much as 3.5 per cent.
Traders said, market participants were also eager to book profits after the recent rally amid already stretched valuations.