Tracking the severe weakness in the stock market, the total investor wealth of BSE-listed companies plummeted by Rs 2,04,724.62 crore to Rs 99,05,243 crore.
The Sensex fell sharply to slip below 27,000-level. The index finally settled 629.82 points or 2.29 per cent lower at 26,877.48.
The Sensex had rallied 908.19 points in the last two session.
"The Indian stock market has seen exceptional volatility in the month so far. FIIs have remained in the sell mode since mid-April, which has been one of the key reasons for the weakness in Indian equities," said Hitesh Agrawal - Head Research, Reliance Securities.
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Goods and Service Tax (GST) amendment bill and the land acquisition bill got stuck in the Rajya Sabha, raising fears of further delay in government's economic reforms, traders said.
Market participants were also cautious ahead of the release of retail inflation data for April and IIP data for March, they added.
Among the 30-Sensex stocks, 28 ended the day with losses led by Tata Steel and BHEL. The only two gainers were Dr Reddys Lab and Hero MotoCorp.