Benchmark indices fell sharply in trade as delay in getting crucial economic bills passed in parliament adversely affected sentiments.
Poor cues from Europe where the German DAX was down more than 2 per cent and the French CAC was also down 2 per cent adversely affected sentiments.
Banking stocks were the worst hit in trade, particularly the PSU banking names. Stocks like Bank of Baroda was down 5 per cent after a spectacular rally of 16 per cent on Monday. Syndicate Bank, Bank of India and IDBI Bank were the worst affected.
Union Bank of India, however, bucked the trend and rallied 4 per cent after the bank reported a good set of quarterly numbers.
Dr Reddy's and Hero Motor Corp were the only two stocks from the Nifty that managed to buck the trend and rallied in trade. Dr Reddy's gained ground after the bank reported numbers that beat estimates.
Metal stocks were hammered out of shape with Tata Steel and Vedanta losing as much as 5 per cent in trade.
Tech stocks also exhibited a very weakish trend with Infosys, TCS and Wipro among the losers.
Meanwhile, markets across Europe were trading with losses and Asian markets closed lower.