Equity benchmark Sensex plummeted 1,170 points on Monday, dragged by losses in Reliance Industries, Bajaj Finance and Kotak Bank.
The 30-share BSE index ended 1,170.12 points or 1.96 per cent lower at 58,465.89.
Similarly, the NSE Nifty fell 348.25 points or 1.96 per cent to 17,416.55.
Among top losers, Reliance Industries (RIL) sank over 4 per cent, after the company shelved a proposed deal to sell a 20 per cent stake in its oil refinery and petrochemical business to Saudi Aramco for an asking of USD 15 billion.
Other laggards included Bajaj Finance, Bajaj Finserv, NTPC, SBI and Titan.
On the other hand, Bharti Airtel, Asian Paints, PowerGrid and IndusInd Bank were the gainers.
"Finally the bears got their act together after a long wait as a series of events over the weekend gave them the upper hand with almost all the sectoral indices barring the metal index plunging, said S Ranganathan, Head of Research at LKP Securities.
The repealing of the agriculture laws had an impact on the PSU stocks while the O2C deal not going through left a 4.5 per cent cut on Reliance, he noted.
Further, he said that even as IPO investors come to terms with the reality, the inflationary impact on demand across several sectors continues to worry the street.
Elsewhere in Asia, bourses in Hong Kong ended with losses, while Tokyo, Shanghai and Seoul were positive.
Stock exchanges in Europe were largely positive in mid-session deals.
Meanwhile, international oil benchmark Brent crude rose 0.34 per cent to USD 79.16 per barrel.
Rupee Slips 12 Paise To End At 74.42 Against US Dollar
The rupee depreciated by 12 paise to end at 74.42 (provisional) against the US dollar on Monday, as massive sell-offs in domestic equities and a strong greenback in the overseas market weighed on investor sentiments.
Besides, rising crude prices in the international market and persistent foreign capital outflows also put pressure on the rupee, forex dealers said.
At the interbank foreign exchange market, the local currency opened weak at 74.36 and lost further ground as the trade progressed to quote 74.51 a dollar.
The local unit finally settled at 74.42 a dollar, down 12 paise over its previous close of 74.30.
Forex markets were closed on Friday on the occasion of Guru Nanak Jayanti'.
Foreign institutional investors were net sellers in the capital market on Thursday, as they offloaded shares worth Rs 3,930.62 crore, according to exchange data.
Gold Gains Marginally; Silver Jumps Rs 444
Gold price in the national capital on Monday gained marginally by Rs 17 to Rs 47,869 per 10 gram amid rupee depreciation, according to HDFC Securities.
In the previous trade, the precious metal had settled at Rs 47,852 per 10 gram.
Silver surged Rs 444 to Rs 64,690 per kilogram from Rs 64,246 per kilogram in the previous trade.
The Indian rupee depreciated 10 paise to close at 74.40 against the US dollar on Monday.
In the international market, both gold and silver were trading flat at USD 1,846 per ounce and USD 24.85 per ounce, respectively.
"Gold prices traded steady with spot gold prices at COMEX trading flat at USD 1,846 per ounce on Monday.
Gold prices traded under pressure falling from recent highs on stronger dollar and surge in US bond yields," HDFC Securities Senior Analyst (Commodities) Tapan Patel said.