Stocks ignored better-than-expected double digit industrial production figures in August to snap a three-day rally on profit-booking after Finance Minister P Chidambaram said he was "surprised and worried" by the sharp rise in stock prices.

Talking at the Hindustan Times Leadership Summit, Chidambaram said: "The steep rise in the Sensex sometimes surprises me and sometimes worries me. The rally is driven by corpus inflow of funds as the fundamentals of the economy does not change on a day-to-day basis."

Weak cues from other Asian markets, and a sedate Reliance Industries annual general meeting, which saw no investor-friendly moves, also dampened market sentiment, said dealers.

The Sensex fell 395.03 points, or 2.1 per cent, to 18,419.04, its biggest drop since August 21. The broader S&P/CNX Nifty slid 96.60 points, or 1.8 per cent, to 5,428.25.

The stocks markets, which had recovered from lower levels after Prime Minister Manmohan Singh ruled out early polls, suffered a setback after the finance minister's speech.

The Sensex, which was down by about 160 points at 2.30 pm when the finance minister started his speech, slipped by over 450 points when the speech ended at 2.53 pm.

Most analysts were of the view that the markets were over- bought, indicating a correction.