Taking cues from global markets which were little enthused by the inaugural speech of US President Barack Obama, Indian equities also fell on Wednesday, pulling a key index down by 3.53 percent.
The sensitive index (Sensex) of the Bombay Stock Exchange (BSE) shut shop at 8,779.17 points, down 3.53 percent or 321.38 points from its close on Tuesday.
The broader S&P CNX Nifty index of the National Stock Exchange also ended in a slump, dropping 3.23 percent from its last close to 2,706.15 points.
Other market indices like the BSE midcap closed in the negative terrain, ending 1.97 percent lower, while the BSE smallcap was down 1.93 percent.
Of the 13 sectoral indices on the Sensex, power and metal indices fell the most, while fast moving consumer goods (FMCG) stocks saw some buying.
Markets were a mixed bag Wednesday with as many as 1,669 stocks declining, 720 scrips advancing and 104 remaining unchanged.
Among major gainers were Hindustan Unilever (up 3.39 percent to close at Rs.254.55) and ITC (up 0.15 percent at Rs.170.70).
Top losers were Sterlite (down 7.97 percent at Rs.237.25), HDFC (down 7.49 percent at Rs.1,372.25) and Tata Power (down 7.32 percent at Rs.713.60).
Among big losers was Educomp, which lost about 22 percent of its scrip value, even after the company came out with statements to allay fears about insider trading.
Earlier, there were media reports that the company had manipulated its accounts, resulting in a rapid growth in its turnover and hefty profits made by the promoters in the company's share trading.
In other Asian markets, the Nikkei, a key index of the Tokyo Stock Exchange, closed 1.56 percent down over its last close while the Hang Seng, a key index of the Hong Kong Stock Exchange, ended trade 1.8 percent lower than its previous close.