Rising covid 19 infections came back to haunt the markets after days of spectacular rallies, which has driven the Sensex and the Nifty by almost 35 per cent from lows hit in March.
Rising cases in the US and also in Germany, left investors worried. White House health advisor Dr. Anthony Fauci warned Tuesday that parts of the U.S. are beginning to see a "disturbing surge" of Covid-19 cases.
U.S. states like California, Texas and Arizona reported their biggest daily jumps of Covid cases, while Germany reported 712 new cases.
European markets were trading with cuts of nearly 2.5 per cent, while Dow Futures pointed to lower openings for the US markets.
The Sensex ended the day lower by 518 points, while the Nifty dropped 160 points in trade. Banking stocks, a barometer for the economy were the worst hit. ICICI Bank plunged almost 7 per cent in trade, while IndusInd Bank dropped 7 per cent and Axis Bank fell 4 per cent in trade.
Reliance Industries was among the few stocks that managed to hold on and end the day steady. Among the few stocks that gained ground in trade were Asian Paints, ITC and Hero Moto Corp.
Shares in Bank of Baroda too ended the day higher after the company's quarterly numbers impressed the markets.