Equity benchmarks Sensex and Nifty plunged over 1.8 per cent on Tuesday, the biggest single-day decline in nearly five weeks, mirroring massive global selloffs amid simmering US-China tensions and mounting COVID-19 cases.
The BSE gauge Sensex ended 660.63 points or 1.80 per cent lower at 36,033.06; while the NSE Nifty closed 195.35 points or 1.81 per cent down at 10,607.35.
Banking stocks continued to slump, crashing over 3 per cent; while metals and auto counters emerged as other major sectoral laggards, ending lower by 2.5 per cent each.
Shares of the HDFC duo led the fall on the indices, shedding up to 2.94 per cent, after HDFC Bank said it has launched a probe into its auto lending practices following allegations against the conduct of a long-time executive who retired on March 31 this year.
IndusInd Bank, Axis Bank, Maruti, PowerGrid, Bajaj Finserv and SBI were among the other major laggards.
On the other hand, Titan, Bharti Airtel and Bajaj Auto were the gainers.
Broader midcap and smallcap indices finished 0.95 per cent lower.
"Key indices corrected close to 2 per cent on weakness in financial and metal stocks. We witnessed profit booking in key auto stocks as their volume numbers are already known to the street for the first quarter," said S Ranganathan, Head of Research at LKP Securities.
Negative cues from global markets amid escalating US-China tensions and rising COVID-19 cases dampened investor sentiment here, traders said.
"The markets exhibited high correlation with the global markets and with the virus infections hitting day highs in India, the uncertainty caught up with the markets. Global markets were weak following rising infections in US and US-China tensions being back in the news," Vinod Nair, Head of Research at Geojit Financial Services, said.
Indian markets were also worried about the increasing number of localised lockdowns which would in turn again slowdown the predicted recovery for businesses, he added.
On the currency front, the Indian rupee tumbled 23 paise to settle at 75.42 against the US dollar.
Meanwhile, international oil benchmark Brent crude futures fell 0.73 per cent to USD 42.41 per barrel.
Asserting that the "Chinese predatory world view" had no place in the 21st century, the US on Monday categorically rejected the territorial claims made by Beijing in South China Sea, stating that it has no legal grounds to unilaterally impose its will on the region.
On the coronavirus front, the number of cases around the world linked to the disease has crossed 1.30 crore.
In India, the number of infections spiked to 9.06 lakh, according to the health ministry.
Bourses in Shanghai, Hong Kong, Tokyo and Seoul closed with significant losses.
Stock exchanges in Europe also began on a negative note.