The Nifty closed at 4500.95, down 126.85 points or 2.7 per cent, after hitting a new 2008-low of 4411.60 intra-day. The Sensex ended at 15066.10, down 506.08 points or 3.25 per cent from Friday. It closed over 200 points higher than the session's low.
The Indian market was the worst performing market among Asian peers. Japan's Nikkei ended down 2 per cent, while South Korea's Kospi 1 per cent.
"If the global cyclical downturn is not bad by itself, the (crude) oil price is complicating everything. We remain negative on the (Indian) market," Nilesh Jasani, head of research - Asia Pacific, Credit Suisse, said.
Credit Suisse expects Sensex to touch 13000 by the year-end. The combined turnover on the exchanges was over Rs 183 billion, compared with Rs 178 billion in the previous session.
CNX Mid-cap and S&P CNX 500 declined around 3 per cent each.
Crude oil prices were hovering around $138 a barrel after touching a record high of $139.12 on Friday.
The shares of real estate companies were the worst hit on Nifty. Real estate is a high-beta sector. When market goes up, these shares rise even higher, and when market falls, they decline more, analysts said.
Unitech, down nearly 10 per cent at Rs 184, was the worst hit on Nifty. DLF fell over 7 per cent to Rs 481, lower than its issue price of Rs 525.
Technology shares saw heavy selling in the last hour of trades. Tata Consultancy Services and HCL Technologies ended down 5 per cent each, at Rs 914 and Rs 297 respectively.
Bharat Petroleum closed down over 7 per cent at Rs 279 on concern its under-recoveries will continue to grow due to the surge in crude oil prices, dealers said.
The state-owned oil explorer Oil and Natural Gas Corp fell 6 per cent to Rs 880, as the company has to bear the subsidy burden when oil prices soar as oil-marketing companies sell petrol products at a subsidised rate.
Cairn India ended up over 4 per cent at Rs 299. Investors are buying the stock as oil price is likely to continue its climb in the short term, dealers said.
Morgan Stanley, in a note last week, said it sees a short-term spike in crude oil prices to $150 a barrel by July 4.
National Aluminium ended up nearly 5 per cent at Rs 516, helped by firm aluminium prices. The stock was the top Nifty gainer.
Pharma shares rose on defensive buying. BSE Healthcare index, up nearly 1 per cent, was the sole gainer among the BSE sector indices.
Ranbaxy Laboratories closed up nearly 4 per cent at Rs 526 and Sun Pharmaceutical Industries 2 per cent at Rs 1,456.
Reliance Petroleum rose nearly 3 per cent at Rs 171 on institutional buying. Hero Honda Motors was up 4 per cent at Rs 787.
