Negative global cues, coupled with a slump in commodity prices and a weak rupee depressed the Indian equity markets on Wednesday.
This led a barometer index of the Indian equity markets to plunge by 418 points to a new 20-month closing low.
Selling frenzy led to both the bellwether indices of the Indian equity markets to close at levels which were last seen during May 2014.
Initially also, both the bellwether indices opened weak in sync with their Asian peers and due to the flat closing of the US markets on Tuesday.
The selling pressure was accelerated after the International Monetary Fund (IMF) slashed its global growth forecasts for the third time in less than a year.
Furthermore, investors were seen to be cautious regarding the slide in the rupee value which touched a low of 68.17 to a US dollar -- its weakest level since early September 2013 during the intra-day trade.
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It ended weaker by 35 paise at 67.95 to a US dollar from its previous close of 67.60 to a greenback.
"RBI (Reserve Bank of India) may have saved the day for rupee by keeping the pair (USD/INR) below 68 by close," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.
"They (RBI) have sold by a significant amount to prevent dollar/rupee burning through the stops on onshore and offshore derivatives markets."
The weakness in the rupee value indicates the massive foreign funds outflow from the Indian equity and debt markets.
This was evident as foreign institutional investors (FIIs) were net sellers during the day's trade, while domestic institutional investors (DIIs) were net buyers.
According to data with stock exchanges, FIIs divested Rs.1,324.69 crore, while DIIs bought stocks worth Rs.1,383.14 crore.
Besides, continuous decline in crude oil prices to a new 12-year low impacted global investors' sentiments.
Global crude oil prices dwindled to $28 per barrel.
However, both the headline indices were able to pare some of their day's losses during the late hour of trade on the back of short-covering and value buying.
This led the barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) to plunge by 418 points or 1.71 percent.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) closed deep in the red. It was down by 126 points or 1.69 percent at 7,309.30 points. This is its lowest closing since May 30, 2014.
The NSE Nifty touched a new 52-week low at 7,241.50 points.
The S&P BSE Sensex, which opened at 24,325.77 points, closed at 24,062.04 points -- down 417.80 points or 1.71 percent from the previous day's close at 24,479.84 points.
This is the lowest closing of the Sensex since May 15, 2014.
During the intra-day trade, the Sensex touched a high of 24,325.77 points and a low of 23,839.76 points -- its new low in 52 weeks.
The S&P BSE market breadth favoured the bears -- with 2,167 declines and only 460 advances.
"Bearish Asian indices, plunge in the rupee value and continuous weakness in oil prices pulled down Indian markets. The general weakness that has plagued markets for the last fortnight continued in the absence of fresh positive triggers," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.
"However, there was some value buying that was seen in the last hour of trade, coupled with strengthening rupee and couple of healthy Q3 results."
Vaibhav Agarwal, vice president and research head at Angel Broking, elaborated that markets continued to witness intense selling pressure after global cues turned negative on the back of further weakness in crude oil prices and the cut in growth forecasts by the IMF.
"The IMF cut its global growth forecasts for the third time in the last one year on the back of sharp slowdown in China and weakness in commodity prices that are hurting markets like Brazil and Russia," Agarwal noted.
"We expect the selling pressure to continue as FIIs continue to pull out from emerging markets and earnings growth not picking up as expected."
Nitasha Shankar, vice president for research with YES Securities, cited that broader markets underperformed the headline indices, as market breadth remained extremely week.
Sector-wise, shares of banking, automobile, metal, healthcare and capital goods came under intense selling pressure.
The S&P BSE banking index plunged by 406.96 points, automobile index receded by 284.03 points, metal index declined by 205.57 points, healthcare index slumped by 163.59 points and capital goods index edged lower by 150.23 points.
Major Sensex gainers during Wednesday's trade were Bajaj Auto, up 0.43 percent at Rs.2,276.25; Hero MotoCorp, up 0.21 percent at Rs.2,488.05 and Wipro, up 0.07 percent at Rs.542.15.
Major Sensex losers during the day's trade were Adani Ports, down 5.53 percent at Rs.219.55; State Bank of India (SBI), down 5.13 percent at Rs.173.70; Reliance Industries, down 3.76 percent at Rs.1,004.35; Coal India, down 3.45 percent at Rs.297.95; and Maruti Suzuki, down 3.40 percent at Rs.4,058.90.