Extending their previous session losses, the BSE benchmark Sensex tumbled to over one-month closing low of 322.39 points to 27,797.01 on heavy selling by funds and retail investors due to weak global cues after crude oil dropped to fresh five-year lows.
Similarly, the NSE index Nifty dropped 97.55 points to end at 8,340.70.
Brokers said sustained selling by participants in blue-chip stocks that recently logged gains and a weak trend in global markets after oil prices skidded to fresh five-year lows led to the fall in domestic markets.
Trading sentiment was also dampened after current account deficit widened to $10.1 billion, or 2.1 per cent of GDP, in July-September quarter of this fiscal, up from 1.2 per cent a year-ago.
Sectoral indices
All BSE sectoral indices ended significantly in the red with power, metal, India infrastructure and PSU indices leading the downtrend. Among them, power index fell the most by 2.75 per cent, followed by metal 2.71 per cent, capital goods 2.29 per cent and India infrastructure index 2.28 per cent.
Gainers, losers
Dr Reddy's (1.53%), Sun Pharma (1.46%), M&M (1.21%) and TCS (0.15%) were the only four Sensex gainers, while the major losers were SSLT (5.24%), ONGC (4.29%), Bharti Airtel (4.24%), Tata Power (4.21%) and NTPC (3.54%).
Meanwhile, foreign portfolio investors (FPIs) bought shares worth Rs 4,984.60 crore yesterday, according to provisional data from the stock exchange.
European markets
European shares extendéd their previous session's losses on Tuesday, mirroring weaker equities in the United States and Asia, with a further drop in oil prices to a five-year low seen hurting energy stocks.
Asian markets
Asian stocks were mostly lower following a decline on Wall Street, though the losses were minor. MSCI's broadest index of Asia-Pacific shares outside Japan was off 0.36 per cent.
Japan's Nikkei eased 0.47 per cent, but that follows a run of strong gains which took it to its highest since July 2007. Chinese shares have also been on a tear with the CSI300 index of the largest listed companies in Shanghai and Shenzhen at levels last visited in 2011.
On Monday, the Dow had lost 0.59 per cent, while the S&P 500 fell 0.73 per cent and the Nasdaq 0.84 per cent.
Crude oil, gold
Brent crude slipped to its lowest in five years on Tuesday, dropping below $66 a barrel after plunging more than 4 per cent the day before on worries over a deepening supply glut.
Brent crude for January delivery was down 43 cents at $65.76 at 0257 GMT on Tuesday - its lowest since October 2009.
Gold gave up some of its overnight gains on Tuesday as the dollar recovered from losses and oil prices weakened, dampening the metal's appeal as a hedge.
Spot gold had slipped 0.2 per cent to $1,200.26 an ounce by 0036 GMT.