The Sensex and the Nifty both fell along with global markets, with the Sensex seeing its biggest ever cut since October 2012.
The Sensex ended the day lower by 317 points, while the Nifty fell 90 points in trade. Banking, metal and realty stocks came in for heavy selling pressure.
Metal stocks in particular were the worst hit as global metal prices fell. Hindalco, Sterlite Industries, Sesa Goa, Tata Steel and Jindal Steel came crashing down.
Banking stocks were also hit hard with ICICI Bank dipping almost 3 per cent in trade. Other banking stocks that fell were HDFC, State Bank of India, Allahabad Bank, Canara Bank, Andhra Bank, IDBI Bank and IOB falling.
Heavyweights Larsen and Toubro and ITC also dropped sharply contributing to a further fall in the Sensex.
Most of the Nifty components ended the day in the red. Only Power Grid, Gail and Bharti Airtel from the index stocks saw some buying support in trade today.
Among non index stocks shares in Videocon Industries rallied 9 per cent on reports that ONGC would pick a stake in the company's Mozambique gas field.
Shriram transport Finance shares dropped sharply today after PG said it planned to sell a stake in the company via block deal.
Meanwhile, markets across the globe dropped sharply with fall in Asia being led by heavy losses in the Chinese, Singapore, Hong Kong and Japanese markets ending the day with heavy losses.
Europe too was trading with heavy losses with the German DAX, French CAC and the UK's FTSE down between 1-1.5 per cent.
Markets are now awaiting the Union Budget to see if the Finance Minister promises big bang reforms.