The NSE Nifty tanked 97.55 points to end below 8,400-mark at 8,340.70 as stocks fell for the third straight session.
Fall of global crude prices to five-year lows failed to lift the global sentiment as Chinese stocks dropped over 5 percent on tighter lending norms and over 1 percent drop in European indices, said traders.
The BSE 30-share Sensex remained in negative terrain for the major part of the session on sustained selling pressure. It moved between 27,763.82 and 28,157.53 range, before ending with a sharp loss of 322.39 points, or 1.15 per cent, at 27,797.01. This is its weakest close since October 30.
In the previous two sessions, Sensex shed 443.42 points. The overall market breadth was negative as about 900 stocks rose while over 2,000 scrips fell.
"Sell-offs seen in Asian markets...impacted market sentiments for the day. Brent crude was seen dropping to its fresh 5-year lows, below USD 66 a barrel," said Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio.
Experts said data showing current account deficit widened to USD 10.1 billion, or 2.1 percent of GDP, in July-September quarter of this fiscal, raised concerns at a time when markets are pricing are strong recovery of the Indian economy.
Sesa Sterlite shares emerged the biggest loser among Sensex components by tumbling over 5 per cent. Shares of state-run ONGC plunged 4.29 per cent.
Other notable laggards include Tata Power, Bharti Airtel, NTPC, Tata Steel, Hindalco, BHEL, L&T, Tata Motors, Wipro, SBI, Cipla, Maruti Suzuki, Axis Bank and ICICI Bank.
Almost all the major Asian stock markets fell after Chinese market tumbled 5.43 per cent, the most since 2009. Indices in Hong Kong and Japan were among the worst-hit.
Sectorally, BSE Power index suffered the most by losing 2.75 per cent, followed by Metal index (2.71 per cent), Capital Goods (2.29 percent) and Consumer Durables (2.11 percent) among others. Selling activity in small and midcap also gathered momentum with BSE Smallcap falling 1.59 percent and Midcap index down 1.57 percent.
Meanwhile, Foreign Portfolio Investors (FPIs) bought shares worth net Rs 4,984.60 crore on Monday.