The benchmark indices shed almost 2% as the turbulence that gripped Chinese markets spooked bourses across Asia.
The lingering uncertainty on the Greece front also kept the market participants on the edge.
The Sensex plunged by 484 points or 1.7% at 27,687 and the Nifty settled below the 8,400 mark at 8,363, down 147 points or 1.7%.
The broader markets also took it on the chin, with the BSE Midcap and Smallcap indices shedding 1.3% each at 10,877 and 11,351 respectively.
The market breadth was negative, with 1,814 declines against 912 advances on the BSE.
Chinese stocks dived 6.2% on Wednesday after the securities regulator said the tumbling stock market in the world's second-biggest economy was in the grip of "panic sentiment" as investors ignored a battery of support measures from Beijing.
The move by the Chinese regulator to tighten margin trading and short selling rules, making it difficult for investors to borrow money to play the market, was the immediate trigger for the mayhem on Chinese bourses.
The Greek saga also continues to dominate the headlines; the Greek government has received another lifeline and Athens has to now submit a set of proposals by Sunday, failing which the ‘Grexit’ may happen sooner than later.
Meanwhile, all eyes are set on the US Fed minutes meeting due later during the day for clues on the outlook for U.S. interest rates.
Rupee
On the currency front, the rupee weakened by 14 paise against the dollar to 63.60 as a result of the market weakness.
Crude oil
Oil fell towards USD 56 a barrel on Wednesday, trading close to three-month lows, as China's accelerating stock market plunge and the Greek debt crisis raised the possibility of weaker economic growth that could hit oil demand.
Global markets
There was bloodbath across Asia, with MSCI's broadest index of Asia-Pacific shares outside Japan closing at its lowest level since February 2014.
The Hang Seng dived by 6.6% at 23,428 and Shanghai plumetted by 6% at 3506. The Nikkei and Taiwan Weighted indices lost around 3% each, while the Straits Times, Kospi and SET Composite have shed about 1% each. However, the European markets have stabilised in this session, with the FTSE, CAC and DAX gaining about 0.5% each.
Sectors and stocks
All the sectoral indices ended in the red, with auto, metal and banking counting among the major losers.
All the Nifty-50 stocks also ended in the red, barring three stocks.
Blue-chips such as Vedanta, Tata Motors, Tata Steel, Hindalco, HDFC, State Bank of India and Infosys were among the major losers on the BSE.
The BSE metal index plummeted by nearly 4%, tracking stock market crash in China and in wake of the fact that LMEX, a gauge of six metals traded on the London Metal Exchange (LME) dipped by 4% on Tuesday. The base metal prices crashed on Tuesday as the dollar became stronger following Greece cues.
Copper prices dived 6% while Nickel plunged 10% on London Metal Exchange. Aluminium was down to a six-year low. Vedanta nosedived by 8.6%, while Hindalco, Tata Steel, NMDC, JSW Steel and Hindustan Zinc shed 2-4% each.
In the Auto pack, Tata Motors shed 6.5% at Rs 404, also its 52-week lows, on concerns about a slowdown in China, which is the biggest market of Tata Motors' Jaguar Land Rover (JLR).
Maruti, M&M and Hero Motocorp also shed around 0.5-2% each. Banking shares also had a weak session amid the Greece and Chinese crisis.
HDFC twins, SBI, Axis Bank, ICICI Bank and Yes Bank shed 1-7% each on the Sensex.
TCS shed 1.1% at Rs 2,588 ahead of its Q1 results scheduled to be announced on Thursday, kicking off the corporate earnings results season.
On the other hand, Hindustan Unilever gained more than 1% as buyers shifted interest to the defensive stock play to tide over the ongoing global turbulence.
Wipro and Cipla also registered mild gains.
In the broader markets, Titagarh Wagons surged 3% at Rs 113 after the company received an industrial license for manufacturing defence items.
Crompton Greaves gained 1% at Rs 178 after the company announced that it has signed a global supply agreement with cement major Lafarge for electrical motors.
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