The Sensex and the Nifty fell sharply in trade as investors sold heavily into defensives like FMCG, Pharma and IT.
Worries over the Minimum Alternate Tax (MAT) for Foreign Institutional Investors and passage of the Land Bill in the Rajya Sabha played on investors mind.
The Sensex ended the day lower by 555 points, while the Nifty fell 162 points in trade.
Leading the set of losers was Reliance Industries, which fell more than 4 per cent, even as the company reported a good set of numbers for Q4 2015.
Defensives took a huge hit in trade with stocks like Dr Reddy's, Cipla, ITC, Infosys and Hindustan Unilever were among the top losers in trade.
Among the few Nifty stocks that saw some buying interest was ICICI Bank and BPCL which remained resilient in trade. HCL Tech ended the day lower ahead of its results to be declared later on Tuesday.
Private sector banks like IndusInd Bank, Yes Bank and Axis Bank continued to fall and there is a likelihood that FIIs may have sold heavily into the counter.
Shares in NMDC lost a huge 4.5 per cent as the company reduced the prices of iron ore. A foreign brokerage firm downgraded the stock.
Today's loss marked the 4th straight day of losses for the Nifty, which has now lost 400 points in trade in just 4 trading sessions.