Investors' wealth eroded by Rs 3.46 lakh crore on Wednesday as equity markets took a sharp tumble amid weak global trends and foreign fund outflows.
The 30-share BSE Sensex fell by 676.53 points or 1.02 per cent to settle at 65,782.78.
During the day, it plunged 1,027.63 points or 1.54 per cent to 65,431.68.
In line with the weak trend in equities, the market capitalisation of BSE-listed firms eroded by Rs 3,46,947.54 crore to Rs 3,03,33,258.69 crore.
"After the euphoric June and July, we are witnessing some healthy corrections today in Indian markets, due to the downgrade of the US rating by Fitch.
"Frankly, the market was waiting for some reason to correct in the last few days as it was in an extremely over-bought zone, and it found its reason.
"The impact on the Indian market should also be short-lived, soon focus will come back on earnings, infra investments, and fund flows," said Vikram Kasat, head advisory at Prabhudas Lilladher.
Fitch Ratings has downgraded the US government's credit rating, citing rising debt at the federal, state, and local levels and a "steady deterioration in standards of governance" over the past two decades.
The rating was cut on Tuesday one notch to AA+ from AAA, the highest possible rating.
"The Indian market witnessed a broad sectoral slide, affected by weak global market trends. Negative news regarding the US rating downgrade on fiscal concerns, coupled with weak factory activity data from Eurozone and China, led to widespread worries across the globe.
"Additionally, prolonged FII selling, triggered by a rise in US bond yields, has disrupted the mood of the domestic market," said Vinod Nair, head of research at Geojit Financial Services.
From the Sensex pack, Tata Steel declined 3.45 per cent, followed by Tata Motors 3.19 per cent. Bajaj Finserv, NTPC, State Bank of India, JSW Steel, Larsen & Toubro and Bharti Airtel were among the other major laggards.
Nestle, Hindustan Unilever, Asian Paints, Tech Mahindra and UltraTech Cement were the gainers.
In the broader market, the BSE midcap gauge fell by 1.39 per cent and smallcap index declined 1.18 per cent.
All indices ended lower with metal tumbling 2.45 per cent, utilities falling by 2.32 per cent, power (2.31 per cent), telecommunication (2 per cent), capital goods (1.83 per cent), auto (1.52 per cent), oil & gas (1.47 per cent), industrials (1.46 per cent), financial services (1.33 per cent) and commodities (1.22 per cent).
"A sharp sell-off in Asian and European markets gave investors a reason to encash on the recent upsurge.
"FIIs seem to have sold off local equities after the record rally last month," said Shrikant Chouhan, Head of Research (Retail), Kotak Securities Ltd.
A total of 2,353 stocks declined while 1,240 advanced and 139 remained unchanged.
In Asian markets, Seoul, Tokyo, Shanghai and Hong Kong ended lower.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 92.85 crore on Tuesday, according to exchange data.
