To compound worries Bloomberg reports saying that chances of a credit ratings downgrade for India are higher than for Indonesia, saw large scale selling pressure.
The cocktail of bad news sent the Sensex tumbling by 651 points, while the Nifty ended the day lower by a mammoth 209 points, snapping a three session rally.
Financials led declines once again in trade on worries that a falling rupee would raise bond yields, leading to a fall in bond prices.
Among the top losers from the space were Axis Bank, HDFC, IndusInd Bank and IDFC. Other Nifty stocks that led declines were Asian Paints, Hero Motor Corp and Power Grid Corporation.
Bellweather pharma stocks also succumbed in trade today with Sun Pharma and Dr Reddy's losing 4 per cent, while Dr Reddy's shed more then 3 per cent.
Heavyweights, Reliance lost a huge 6 per cent and ITC also lost 6 per cent in trade after witnessing a sharp rally on Monday.On the other hand HDFC, HDFC Bank and ICICI Bank declined by 5 per cent each.
Stocks that gained in trade from the Nifty were Cairn India, Coal India, and Lupin Labs. Tata Consultancy Services which has been hitting lifetime highs also gave up gains and ended the day significantly lower. The rupee meanwhile, which dropped below the 68 mark recovered and was last trading at 67.96.
Meanwhile, markets in Asia ended the day higher even as worries over a Syrian military strike receded.