Profit-booking by speculators after two sessions of gains also dragged the Sensex down.
The 30-share barometer, which gained over 376 points in the previous two sessions, fell by 192.27 points, or 1.03 per cent, to 18,416.54 in the first few minutes of trade on Thursday.
Stocks of banking, realty, metals and auto companies suffered the most in the fresh sell-off.
Similarly, the wide-based National Stock Exchange Nifty index slid by 60.10 points, or 1.07 per cent, to 5,531.90.
Market experts said the trading sentiment was bearish amid a subdued trend on global markets following weak US economic data.
In addition, the cautious approach adopted by investors ahead of the release of food inflation data later on Thursday also dampened the sentiment, they said.
In the Asian region, Hong Kong`s Hang Seng index was trading 1.69 per cent lower and Japan`s Nikkei shed 1.64 per cent this morning. In the US, the Dow Jones Industrial Average ended 2.22 per cent lower in yesterday`s trade.