Frenzied selling towards the close saw the index slide to a low of 5,159. The Sensex finally closed with a huge loss of 1.5% at 5,175 - down 77 points. The Nifty finished 2% lower at 1,618 - down 34 points.
Reliance closed 3.5% lower at Rs 479.
Infosys, Satyam and Wipro ended with losses of over a per cent each at Rs 1,500, Rs 341 and Rs 554.
ITC, Ranbaxy and Hindalco were the only significant gainers. The stocks ended at Rs 1,047 (up Rs 9), Rs 978 (up Rs 13) and Rs 1,112 (up Rs 17), respectively.
Auto, cement and PSU stocks ended with steep declines.