But operators said there was "no need to panic" and termed the fall as a "technical correction of the overheated market".
The fall of 307 points in Sensex, which closed at 11,355.73, was the second heaviest since it tanked 563 points on May 17, 2004 when the UPA government was being formed.
Marketmen said the fall was a mere correction and that "a correction was long due" in the overheated market. But there was no panic among players and some rather said this could provide a fresh opportunity to enter the market.
They reminded that market had overcome the free fall of 268 points last week during a single trading day.
All the 30 Sensex-linked shares at Bombay Stock Exchange lost ground from their previous closing and all the sectoral indices ended with a fall between 2.5 and 3.75 percent, led by capital goods stocks.
There was all around selling pressure, mainly by the foreign funds combined with domestic institutions. The BSE index was ruling nearly 360 point down during the day but recovered partially only to reduce the losses.
Loss in the National Stock Exchange Index was even more pronounced losing 98.45 points, nearly three per cent to close at 3380, after touching day's low of 3366.75.
One of the prominent loser was Tata Consultancy, which registered its biggest-ever fall of about six per cent (Rs 112) ever since it was listed on the bourses. The scrip closed at Rs 1783.10.
Nifty: Largest fall after May 17, 2004
Heavy pull-out by foreign funds took its toll on share values on the National Stock Exchange on Wednesday and the S&P CNX Nifty tumbled by a massive 98.45 points to close at 3,380.00.
The Nifty registered its biggest fall since 'Black Monday' on May 17, 2004 when it had crashed by 193.65 points after the congress-led UPA government came into power, dealers said.
The S&P CNX Nifty opened slightly changed at 3,479.10 as against Monday's close of 3,478.45 and logged a high of 3,484.65.
Later, it turned sharply bearish on heavy sell-off and touched a low of 3,366.75 before ending at 3,380.00, a steep fall of 2.83 per cent. Right from the beginning, IT shares displayed a weak trend following subdued Nasdaq advices which were spread across-the-board in the afternoon and most of the counters finished with sharp losses, they added.
According to marketmen, feeble global advices and higher world oil prices also further aggravated the situation.
Foreign Institutional Investors, who sold shares worth Rs 427.10 crore (Rs 4.27 billion) on last Friday, once again pressed sales of Rs 421.70 crore (Rs 4.21 billion) on Monday.
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