The 30-share BSE Sensex extended fall, losing 300 points due to consistent broad-based selling. European markets too shed somewhat gains after Spanish bond yields rose to a record high.
The BSE benchmark plunged 302 points or 1.78% to 16,647.89, weighed down by 28 stocks. Meanwhile, the NSE benchmark was down 95.95 points or 1.87% to 5,043.10.
The Indian rupee fell 39 paise to 55.78 as against the US dollar. Euro declined 0.56% to 1.26 as against the US dollar.
The Bank Nifty crashed over 3.5% as the Reserve Bank of India kept policy rates and CRR unchanged at its mid-quarter monetary policy review due to higher retail inflation.
Country's largest lenders State Bank of India and ICICI Bank plummeted over 4% while rival HDFC Bank was down 3%. Housing finance company fell over 1%.
Cigarette major ITC, index heavyweight Reliance Industries and top commercial vehicle major Tata Motors were down 1.8% each.
Engineering and construction major by sales Larsen & Toubro