Domestic equity benchmark BSE Sensex plummeted over 600 points in afternoon session on Tuesday tracking heavy selloff in banking, energy and auto stocks as a slew of macroeconomic data releases suggested a worsening economic slowdown.
The 30-share index was trading 595.08 points, or 1.59 per cent, lower at 36,737.71 at 1400 hours, while the broader Nifty sank 171.90 points, or 1.56 per cent, to 10,851.35 in early trade.
Top losers in the Sensex pack included ICICI Bank, Vedanta, HDFC, Tata Motors, Tata Steel, ONGC, IndusInd Bank, NTPC, M&M and L&T, falling up to 4 per cent.
On the other hand, IT stocks rallied as the rupee depreciated 85 paise against its previous close to trade at 72.27 in afternoon session.
TechM, HCL Tech, TCS and Infosys jumped up to 2 per cent.
Public sector bank stocks, led by Corporation Bank and Punjab National Bank, tumbled up to 9.3 per cent (intra-day) after the government, on Friday, announced the merger of 10 state-run lenders into four.
It gives a positive signal that the government is not just focusing on recapitalising the bank but also in improving the governance in the public sector banks (PSBs), Matthews said.
However, the merger will still be painful as a result of the geographic and cultural diversity of the merging entities, according to Emkay Global.
According to traders, despite several efforts by the government to boost the economy, market sentiment took a hit on account of weak macroeconomic data releases and double-digit decline in auto sales in August as the sector continued to reel under one of the worst slowdowns in its history.
Official data released after market hours on Friday showed that India's GDP growth slipped to an over six-year low of 5 per cent in the June quarter of 2019-20, hit by a sharp deceleration in manufacturing output and subdued farm sector activity.
Additionally, the country's manufacturing sector activity declined to its 15-month low in August, owing to slower increases in sales, output and employment, the IHS Markit India Manufacturing Purchasing Managers' Index showed.
Growth of eight core industries also dropped to 2.1 per cent in July, mainly due to contraction in coal, crude oil and natural gas production, according to a government data released on Monday.
"GDP growth slowing down to 5 per cent is indeed worrying," said Deepthi Mathews, Economist at Geojit Financial Services, adding that the number shows that the economy has not still entered the recovery path.
Elsewhere in Asia, bourses in Shanghai, Hong Kong, Korea and Japan were ended on a weak note after the US and China on Sunday put in place their latest tariff increases on each other's goods.
Exchanges in Europe were also trading the the red in their respective early sessions.
Global oil benchmark Brent crude fell 0.84 per cent to 58.17 per barrel (intra-day).
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