The broader Nifty also slipped below the 7,700 level on across-the-board selling.
In addition, weakness in the rupee against the American currency too weighed on the sentiment.
In overseas markets, trading in mainland China was suspended for the rest of the day after the CSI300 index tumbled more than 7 per cent in early trade, triggering the market's circuit-breaker for a second time this week.
Persistent foreign capital outflows also affected the market sentiment. Foreign investors sold shares worth Rs 242.48
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crores yesterday as per provisional data.
The Sensex resumed lower at 25,224.70 and dropped further to 24,991.24 in early trade. After a small recovery, it was trading at 25,011.87, down 394.46 points or 1.55 per cent.
The NSE 50-share Nifty also fell by 126.05 points or 1.63 per cent to 7,614.95 at 1100hrs.
All the sectoral indices led by metal, capital goods and auto were trading in the negative zone with losses up to 3.12 per cent.
Brokers said sentiment remained weak as investors indulged in offloading positions, tracking a weak trend overseas on a slew of negative factors, including crude oil slumping to multi-year lows.
In other Asian markets, Hong Kong's Hang Seng index was down 3.05 per cent while Japan's Nikkei shed 1.78 per cent in early trade today.