The Sensex ended the day sharply lower by 232 points (provisional), while the Nifty lost 79 points in trade. Software stocks managed to hold steady in a falling market with TCS and HCL Tech ending the day flat. Nifty stocks that lost maximum ground in trade were Jaiprakash Associates, Tata Steel, DLF and Tata Motors.
Ambuja Cements fell as much as 5 per cent, a fall not seen since July 2013. Banking stocks reacted to comments from RBI Governor Raghuram Rajan who said that inflation was a "destructive disease". Stocks from the sector fell ahead of the RBI's Monetary Policy meet due next week and comments from the RBI Governor, which may have left investors worried over another rate hike.
Canara Bank slumped almost 7 per cent, after going ex-dividend. Other stocks that lost ground from the sector were Bank of India, Syndicate Bank, Yes Bank and ICICI Bank.
The stock of Cairn India managed to stay resilient in a falling market after Jefferies upgraded the stock to overweight.
Mid cap stocks, which have been in the limelight, following a number of buy recommendation from analysts were the hardest hit in trade. Apollo Tyres, JSW Steel and Oriental Bank saw cuts of more than 4 per cent.
Biocon saw selling pressure for a second day in a row, after its results disappointed the street. The stock ended the day with losses of 5.66 per cent.
Meanwhile, Asian markets slumped in trade after weak overnight closings in the US. The Nikkei saw a cut of almost 2 per cent in trade, while Hang Sang lost 1.25 per cent.