The Asian shares fell on the fears that European leaders may not be able to come out with the effective solution to the nation's debt crisis over European Union summit which is going to held later in a day.
The investors also turned sour on the government's decision to suspend FDI in retail.
Food inflation dropped from 8% to 6.6% for the week ended November 26 but it did not attract investors much as the euro zone debt crisis over-weighed the inflation numbers.
The benchmark Sensex closed 2.30% or 388 points down at 16,488.24, while the NSE Nifty slipped 2.35% or 118.95 points down at 4,943.65.
JP Associates, RCOM, Hindalco, L&T and SESA Goa were among the major losers on the NSE, lost between 4.46% - 5.32%.
The stocks gained on the BSE were Wipro, SAIL, Cipla, Sun Pharma and HCL Tech, gained between 0.61% - 1.92%.
On the sectoral front on the BSE, all the sectors were under the red zone, with the CapitalGoods (3.42%), Realty (3.17%), Oil & Gas (2.57%), Metal (2.55%) and Power (2.43%) being the major losers.
Over the Asian front, all the major bourses ended negative, with China's Shanghai ended down by 3.09 points, Nikkei 225 by 57.59 points and Hong Kong's Hang Seng closed 132.77 points low.
On the European front, all the major European bourses were trading in green, CAC 40 was up by 20.96 points and FTSE 100 added 20.72 points during the initial part of the trade.