Markets slumped in late trades on Wednesday to close nearly 1.4% down weighed down by selling pressure in index heavyweights.
At the close the Sensex was down 239 points at 18,802 and the Nifty gave off 75 points to close at 5,673.
The broader too turned weak in the last hour trade, with the midcap index closing down 1% and the smallcap index weakened by 0.6%.
In Asia, Japan's Nikkei average jumped 3%, its biggest one-day rise in almost two months, on growing expectations that the central bank will announce further easing steps on Thursday.
The benchmark Nikkei rose to close at 12,362.
Hong Kong shares fell for a second day as lower oil prices pulled down the energy sector in thin trade ahead of a holiday break.
The Hang Seng Index closed down 0.1% at 22,337, its second loss in three days.
European shares and the euro eased while German bonds were flat as investors awaited this week's policy decisions by the Bank of Japan and European Central Bank followed by U.S. employment data.
Also, Cyprus's new Finance Minister Haris Georgiades was sworn in today following his predecessor's resignation hours after a probe was launched into how the island was pushed to the verge of bankruptcy.
London's FTSE, Paris's CAC-40 and Frankfurt's DAX all opened between 0.1-0.4% lower after equally strong gains on Tuesday.
Back home, selling pressure persisted across the sectors except Health Care which closed flat with a positive bias.
The sectoral indices which weighed in today's market were Realty, Auto, Capital Goods and Metal indices which lost between 2-2.7%.
Bankex, Oil & Gas, Consumer Durables, PSU and IT indices shed 1-1.8%
Auto stocks were under pressure after reporting disappointing March sales numbers as demand has weakened on the back of economic slowdown and consequently weak consumer and business sentiments.
Bajaj Auto, Tata Motors, Mahindra and Mahindra and Hero MotoCorp down 2-4% were among the top Sensex losers.
The other stocks which closed in the negative included Bharti Airtel, Sterlite, L&T, Reliance Industries, Hindalco, Gail India, ONGC, Jindal Steel, SBI, ICICI Bank, Hindustan Unilever, TCS and Coal India losing 1.5-4%.
Power stocks managed to withstand the downfall after the Adani Power ruling from the power sector regulator, Central Electricity Regulatory Commission, on the issue of supply of electricity from its imported coal-based power project at Mundra in Gujarat.
The stock gained nearly 9% along with Tata Power up 0.6%.
Bucking the larger market trend, the only gainers among the Sensex-30 were Sun Pharma, NTPC up 1%each.
Among other stocks, TVS Motor Company gained 6.5% to Rs 34 in otherwise weak market after the two-wheeler manufacture said that the company is in talks with German Auto-maker, BMW for a technology tie up.
Aurobindo Pharma edged higher by 2% to Rs 160 after the company said it has received tentative approval from the US Food & Drug Administration (USFDA) to manufacture and market anti-AIDS combination drug Efavirenz/ Emtricitabine and Tenofovir Disoproxil Fumarate Tablets.
MOIL gained 3% at Rs 237 after the state-owned manganese ore producer has hiked prices by 9% across its product basket for the April-June quarter.
The market breadth was negative on the BSE. 1446 stocks declined while 1311 stocks advanced.