The Sensex and the Nifty dropped sharply in trade on worries that the US Fed would hike interest rates sooner then expected following robust employment data from the US.
The Sensex ended the day with loss of 604 points, while the Nifty closed the day lower by 181 points.
Guidance by IT major TCS also did not help sentiments with the stock dropping almost 2 per cent in trade. Infosys and Wipro were the other IT stocks that fell following poor guidance from TCS.
Shares in Hindustan Unilever gained ground as investors shifted their attention to defensives. ITC, however fell marginally in trade.
Mid cap stocks also saw a sharp decline with Bharat Forge and Jain Irrigation being among the top losers in trade.
Hindalco was among the top loser from the Nifty despite bidding for the Dumri block. Container Corporation surged a huge 8 per cent after the RBI said that FIIs/RFPIs can now invest up to 34 percent in the company.
Kernex Microsystems rallied after the board said it will consider proposal for sale of selected assets to finance new projects tomorrow.
Meanwhile, markets across Asia fell sharply following fears of an interest rate hike. European markets managed to restrict losses as the QE begins to take effect.
The German DAX was down 32 points, while the UK's FTSE was marginally down by 25 points.