There was a rout in the domestic stock markets today with major indices falling over three per cent in a single session.

Continuing concerns of a global slowdown, crude oil close to 12-year lows and locally, banks reporting rising bad debts, higher provisioning and dramatic falls in quarterly profit, led to the mayhem.

The Sensex lost 807 points to end at 22,951.83, while the Nifty finished at 6,996, down 239 points, breaking the crucial 7,000 psychological barrier.

The Bank Nifty lost a massive 3.84 per cent, closing at 14,028.55. Financial services, auto, commodities and energy stocks closed down three per cent.

Among BSE sectoral indices, realty index plunged the most by 5.94 per cent, followed by infrastructure 5.4 per cent, power 4.81 per cent and PSU 3.9 per cent.

Major Sensex losers were Adani Ports (-6.94%), BHEL (-6.01%), Tata Motors (-5.55%), ONGC (-5.23%) and M&M (-4.93%), while the only two gainers were Cipla (+0.4%) and Dr Reddy's (+0.01%).

Globally, record crude inventories in the US sent Brent crude futures down to $30.53 a barrel, while WTI touched $26.76, close to their lowest levels since 2003.

The US Federal Reserve is caught in limbo, unable to raise interest rates as it had initially planned but also unwilling to back on the tighter monetary policy path it had chosen.

Back home, banks saw their stocks reeling from the RBI’s forced clean-up of balance sheets. State Bank of India reported a 62 per cent fall in profit and gross NPAs up 28 per cent. The stock lost close to three per cent to close at Rs 154.20. Indian Bank lost 5.70 per cent to close at Rs 80.30.

The BSE Midcap index lost 3.27 per cent to close at 9,690.90, while the Smallcap index closed down 4.64 per cent at 9,801.26.

Dipen Shah, Senior Vice-President & Head of Private Client Group Research, Kotak Securities, said: “Markets fell steeply on the back of continuing concerns about a global slowdown and the consequent impact on the financial sector. The US Fed also did not provide any further clarity on the possible interest rate movements. Quarterly results declared over the past few days have also not met up to the muted expectations and that also impacted sentiments. Going ahead, global concerns will remain at the centre-stage and will likely dictate market sentiments. On the domestic front, we need to closely watch the budget where the FM has a difficult task of supporting growth while maintaining fiscal prudence.”

Global market turmoil

Global sentiment was also hit after after Fed chair Janet Yellen kept options open for more US rate hikes. Yellen told Congress she does not expect to reverse the rate hike programme that began in December but said she saw risks to the US economy.

Weaker global markets have hit Indian shares this year, with the broader NSE index down around 10 per cent, compared with a fall of around 11 per cent in the MSCI's Asia-Pacific index excluding Japan.

Analysts say sentiment remains week, given concerns about earnings, including SBI on Thursday. Foreign investors have sold $1.9 billion in Indian shares so far this year.

"This pressure is likely to continue. We are not expecting a solid recovery. There may be sharp downgrades coming after the results in FY17," said Daljeet Kohli, director and head of research at IndiaNivesh Securities.

"If the Budget is able to show some direction on how the demand will be created, a bounce-back can sustain."

European shares fell on Thursday, led down by a renewed drop in banks and miners, with Societe Generale and Rio Tinto both under pressure after disappointing with their latest results.

The pan-European FTSEurofirst 300 was down 2.1 per cent at 1,215.46 points by 0815 GMT. It rose 1.8 per cent in the previous session, snapping a 7-day losing run.

Hong Kong’s Hang Seng slumped 4.2 per cent in early trade today leading another sell-off across Asian markets and extending a global rout. However, financial markets in China and Japan are closed today for public holidays.

A report by SMC Global said: "Asian stocks fell as markets in Hong Kong and Seoul joined a global sell-off in their first day of trading this week. US stocks closed mixed on Wednesday after Janet Yellen's testimony, as reiterating economic conditions will likely warrant gradual rate hikes, she acknowledged the downside risks to the economy coming from abroad. US wholesale inventories edged down by 0.1 per cent in December after sliding by a revised 0.4 per cent in November. The modest drop in inventories matched economist estimates. The decrease came as inventories of durable goods fell by 0.3 per cent in December following a 0.4 per cent drop in the previous month."