The Sensex was down 362.15 points or 1.5 percent at 23191.97 and the Nifty slipped 114.70 points or 1.6 percent at 7048.25 in the closing trade on Tuesday.
Total of 623 shares have advanced, 1993 shares declined, and 109 shares are unchanged.
Adani Ports, NTPC, Dr Reddy's Labs, Wipro and Hero MotoCorp are top gainers while SBI, BHEL, Tata Motors and GAIL are top losers in the Sensex.
European markets rallied at the open earlier after European Central Bank (ECB) President Mario Draghi hinted at further monetary policy easing. Draghi said on Monday that the ECB is "ready to do its part" to make "the euro area more resilient", hinting at further stimulus measures to come.
Markets were also helped by comments out of China. Investors shrugged off poor Chinese trade data that saw exports and imports plunge, after People's Bank of China (PBOC) governor Zhou Xiaochuan dismissed the ideas of capital controls and said he saw no basis for a continuing depreciation of the yuan.