The Sensex dropped by 240 points, while the Nifty fell by 79 points in early trade. Among the early losers in trade were Jaiprakash Associates, DLF, Tata Motors, Hindalco, ONGC and Reliance Industries.
Among the few stocks that gained in trade were the IT stocks that rallied on a falling rupee which touched a new historic low in trade today. Infosys gained 1 per cent, while Wipro was up 0.7 per cent.
PSU banking stocks were trading sharply lower with Allahabad Bank, Andhra Bank, Canara Bank and Union Bank falling almost 2 per cent.
The Bank Nifty was down almost 2 per cent in trade with even private sector banking names like ICICI Bank, Axis Bank and HDFC Bank falling in trade.
Gillette India was down more than 2 per cent after reports that Sebi had cracked the whip on Gillette India promoters, directors.
Realty stocks were also beaten down in line with the broad markets with DB Realty and HDIL losing 4 per cent, while Indiabulls and Unitech lost 3 per cent each.
Meanwhile, markets in Asia were trading sharply lower except the Japanese Nikkei which was trading with gains.