By 1125, Sensex plunged by 51 points at 19,700, and the Nifty down 22 points at 5,965 levels.
On the global front, Asian shares eased on Tuesday as investors booked profits from recent strong rallies in the face of weak US data and worries that a potential political shake-up could disrupt the eurozone's efforts to resolve its debt crisis. Nikkei, Strait Times, Taiwan, Kospi and Hang Seng have fallen between 1-2%.
Back home, growth in China's services sector hit a four-month high in January, a private survey showed, as a better business climate increased deal-making and lifted corporate confidence to an eight-month peak.
The HSBC services purchasing managers' index (PMI) rose to 54 in January, up from December's 51.7, moving more comfortably into territory above the 50-point threshold that separates accelerating from slowing growth.
The rupee declined by 5 paise to Rs 53.33 per dollar in early trade on the Interbank Foreign Exchange market today, weighed down by dollar's gains against other currency rivals.
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On the sectoral front, Consumer Durable, Realty, Capital Goods, Metal, Power, FMCG, Oil & Gas and Banks have plunged by almost 1% each. However, BSE Healthcare index has surged by nearly 1%.
BHEL is the top Sensex loser, down over 3%. Other notable losers include Sterlite, Tata Motors, Hero Moto, Coal India, RIL, JSPL, HDFC Bank, ITC, ICICI Bank and L&T.
On the gaining side, Sun Pharma is the top Sensex gainer, up nearly 4% after the company said US health regulators have approved a generic version of the cancer drug Doxil.
GAIL, NTPC, Maruti Suzuki and M&M have gained between 1-2%.
Among other shares, Kingfisher Airlines has dipped 4% to Rs 12.04 after reporting a net loss of Rs 755 crore for the December 2012 (Q3) quarter of the current fiscal mainly due to finance cost of Rs 401 crore and a one-time cost of Rs 275 crore due to re-delivery of aircraft.
The broader indices have been battered more as compared to benchmarks – BSE Midcap and Smallcap indices are almost 1% each.
The market breadth has weakened further with 1,575 declining and 698 shares advancing.