Benchmark indices fell for the second straight day with the Nifty briefly falling below the 8000 mark, before recovering in the last 30 minutes. This was exactly 1000 points below the record of 9000 points hit in early March, 2015.
The rupee also weakened beyond the 64 levels, raising fresh worries that petrol prices would be hiked leading to inflation.
Banking stocks came in for heavy selling pressure with private sector banking stocks like Axis Bank, ICICI Bank, IndusInd Bank and Yes Bank losing heavy ground.
PSU banking stocks plunged in trade with Oriental Bank of Commerce and Bank of India among the major losers.
Some buying in Tata Consultancy Services managed to support the index. The stock ended the day higher by more than 2 per cent. Apart from TCS, HCL Tech and Wipro also showed some smart gains.
IDFC was the top loser in trade today shedding more than 4 per cent. SKS Micro Finance fell after Morgan Stanley sold shares in the company.
Asian markets also ended the day weak following poor cues from US markets.