"Indian markets have received substantial FIIs (foreign institutional investor) money over the past few months and any reversal of the same may make markets vulnerable, if matching flows do not come from the domestic participants," he added.
The Nifty of the National Stock Exchange also plunged 91 points, or 1.5%, to 5,852.
Banking shares were among the major losers. While ICICI Bank fell 4%, SBI declined 2%. Major losers also included Jindal Steel (down 4.2 %), Tata Steel (4%) and Sterlite Industries (4%).