Benchmark indices ended the day sharply lower, as commodity prices led by crude oil fell, dragging markets across the globe lower.
A sharp fall in European markets pulled benchmark indices in India lower, after PMI data in Europe showed that economic activity continued to remain sluggish.
The Reserve Bank of India's Monetary policy, which saw the central bank cut interest rates by 25 basis points, was largely on expected lines.
Investors sold into banking shares heavily, after hopes that there maybe a 50 basis points cut by the RBI were belied.
Bank Nifty saw steep cuts with heavyweight ICICI Bank dragging the Bank Nifty lower. The stock lost a huge 5 per cent in trade, while other losers were State of India, Bank of India and Bank of Baroda.
Shares in NDTV fell after reports that the company got an order from Income Tax Dept for tax demand of Rs 47.3 crore for assessment year 2007-08.
Midcap stocks saw even bigger losses with Canara Bank, Union Bank and Reliance Capital amongst the biggest losers in trade from the midcap space.
Biocon was among the few stocks that saw good buying interest with the stock up 6 per cent, after it was upgraded by Morgan Stanley.
Meanwhile, markets across Europe were trading with steep losses. The German DAX and the French CAC were down more than 2 per cent in trade.