Markets slumped in late trades with the Sensex touching a low of 16,838.
The index opened on a cautious note after global markets weakened on fears of the debt crisis spreading further.
However, it managed to recover on the back of buying in auto shares. Thereafter, the index remained volatile in a narrow range.
The Sensex finally ended down 236 points at 16,883.
Nifty ended at 5,069 - down 80 points.
Asian shares were down today as changes in the government failed to comfort investors about the strength of the Euro-zone recovery.
Hang Seng dropped 0.8% to 19,348. Nikkei added 0.7% to 8,542.
Meanwhile, Macquarie downgraded its India's growth forecast for the year to March 2013 by 1 percentage point to 6.9% due to a lack of policy reforms and the lagged impact of monetary tightening.
All the sectoral indices were in the red with realty, power and banking stocks slumping in trades. Realty shares fell with the BSE realty index dropping 5.2% to 1,671.
DLF fell for the third straight day and was down 6.6% at Rs 208.
Jaiprakash Associates fell 5.8% at Rs 70 in spite of reporting 11% rise in net profit at Rs 18.65 crore.
Tata Power dropped 1.5% at Rs 99 after reporting a consolidated net loss of Rs 1,219 crore for quarter ended September on account of provision for impairment of Coastal Gujarat Power assets and foreign exchange loss amounting of Rs 1,462 crore.
Tata Motors was down 2% at Rs 181 on reporting a 15% year-on-year drop in profit to Rs 1,880 crore due to higher raw material cost and currency losses. Analysts expected the company to report a net profit of Rs 2,048 crore.
"Tata Motors had rallied very smartly from 137 to 200 in 2 months and could find support at 165 levels while tata power has started making new lows indicating extreme weakness", said Rakesh Gandhi, Sr Technical Analyst - Advisory, LKP Securities.
Among pharma stocks, Cipla rallied 6.5% at Rs 307 after reporting better-than-expected 17.5% year-on-year growth in net profit at Rs 309 crore due to improved realizations, reduction in input costs and higher utilisation of Indore SEZ facilities.
Ranbaxy was down 3% at Rs 469 on fears that Pfizer marketing may hit the company's profit from low-cost lipitor version.
Kingfisher Airlines owner Vijay Mallya today spoke about the recent debt woes of the carrier. Mallya has confirmed that the airlines cannot afford to fly on heavily loss-making routes.
He also said that he has not asked government or banks for any bailout package, but wants a working capital from the banks. Shares of Kingfisher was up 2.3% at Rs 21.85. However, United Spirits stock fell 11% while United Breweries dropped 2.6%.
BSE market breadth was negative.
Out of 2,960 shares traded, 2,228 shares declined while 631 shares advanced in trades.
