Equity benchmark Sensex plunged 525 points on Monday, led by losses in index majors HDFC twins, Tata Steel and ICICI Bank amid a selloff in global markets.
The 30-share BSE index ended 524.96 points or 0.89 per cent lower at 58,490.93. Similarly, the broader NSE Nifty tumbled 188.25 points or 1.07 per cent to 17,396.90.
Tata Steel was the top loser in the Sensex pack, sinking nearly 10 per cent, followed by SBI, IndusInd Bank, HDFC, Dr Reddy's and M&M.
On the other hand, HUL, Bajaj Finserv, ITC and HCL Tech were among the gainers.
"Indian markets finally seem to be taking a small pause, largely driven by nervousness in the global markets," said Milind Muchhala, Executive Director, Julius Baer.
"Two key factors playing on the minds of global investors include the upcoming Fed meeting and the uncertainty building up in the Chinese real estate market due to stress on one of the major property players in the country," he added.
While the markets are keenly awaiting clarity on Fed's taper plans in terms of timelines and quantum, we believe it may give an advance notice on tapering in this week's meeting, followed by a formal announcement at the following meeting in November, he stated.
Elsewhere in Asia, Hang Seng ended over 3 per cent lower. Bourses in China, Japan and South Korea were closed for holidays.
Stock exchanges in Europe were also trading with steep losses in mid-session deals.
Rupee Slumps 26 Paise To Close At 73.74 Against US Dollar
The Indian rupee fell by 26 paise to close at 73.74 (provisional) against the US dollar on Monday, tracking a strong American currency in the overseas market and muted trend in domestic equities.
At the interbank foreign exchange market, the local currency opened at 73.82 and finally settled for the day at 73.74 a dollar, down 26 paise over its previous close.
In the previous session on Friday, the rupee had settled at 73.48 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.27 per cent higher at 93.44.
"The Indian rupee started the week on back foot as markets are in a risk-averse mood, triggered by the worries over the Chinese property developer Evergrande's debt crisis," said Dilip Parmar, Research Analyst, HDFC Securities.
"Volatility buyers are active in the forex markets as this week will witness fourteen central banks, apart from crucial FOMC, rate decisions and elections in Canada and Germany," Parmar said.
The INR/USD pair is expected to find resistance around 74 while hold support at 73.40, he noted.
Brent crude futures, the global oil benchmark, fell 1.79 per cent to USD 73.99 per barrel.
Gold Marginally Higher; Silver Jumps Rs 98
Gold in the national capital on Monday gained marginally by Rs 14 to Rs 45,080 per 10 gram supported by rupee depreciation, according to HDFC Securities.
In the previous trade, the precious metal had settled at Rs 45,066 per 10 gram.
Silver jumped Rs 98 to Rs 58,890 per kilogram from Rs 58,792 per kilogram in the previous trade.
The Indian rupee depreciated 34 paise to 73.82 against the US dollar in opening trade on Monday.
In the international market, gold was marginally lower at USD 1,753 per ounce and silver was flat at USD 22.47 per ounce.
"Gold prices traded weak with spot gold prices at COMEX trading marginally down at $1,753 per ounce on Monday. Gold prices traded under pressure on stronger dollar," according to HDFC Securities, Senior Analyst (Commodities), Tapan Patel.