Investors were not too enthused by the Reserve Bank's 25 bps rate cut and global cues did not help either as market benchmark Sensex plunged by 516 points, most in nearly two months, to crack below the 25,000-mark, with banking stocks taking a big knock.
Participants said no change in Cash Reserve Ratio (CRR), also had its bearing on the sentiment.
Among rate-sensitive stocks, ICICI Bank topped the list by tumbling 5.45 per cent followed by SBI 5.38 per cent, Axis Bank 2.89 per cent, HDFC Bank 1.03 per cent and HDFC 0.07 per cent. Realty and auto stocks suffered too.
The sell-off was so intense that barring Lupin, all 30 Sensex shares ended in the red and lost up to 6.23 per cent.
Broader markets were also lower with mid-cap index falling 1.47 per cent and small-cap down 1.40 per cent.
"It did not help that global markets were in deep red, with US Fed minutes expected tomorrow. Cash market volumes as well as FII buying have also been easing for the past few days, in contrast to a bright March," said Anand James Chief Market Strategist at Geojit BNP Paribas.
Faltering volumes could be attributed to the cloud that has fallen on high frequency trading after Sebi's technical advisory committee recommended action on the basis of reports of unfair access to market data, he added.
For the day, Sensex resumed lower at 25,372.44 and fell further to a low of 24,837.51 before finishing at 24,883.59, showing a loss of 516.06 points of 2.03 per cent. This was index's biggest single-day fall since February 11.
The NSE index Nifty after dipping below the psychological 7,600-mark, touched a low of 7,588.65, before settling 155.60 points or 2.01 per cent at 7,603.20.
Stating that borrowing rates will come down further, RBI Governor Raghuram Rajan on Tuesday said the 0.25 per cent rate cut should be looked in conjunction with the new loan pricing method that has already resulted in lending rates coming down by up to 0.50 per cent.
Loans are set to get cheaper with RBI reducing short-term lending to over five-year low of 6.5 per cent, taking the total cut to 1.5 per cent since January last year.
Overseas, Japanese stocks led decline in Asian markets on uncertainty regarding the quantum and timing of interest rate hikes in the US. Japan's Nikkei closed 2.42 per cent lower, while indices in Hong Kong, Singapore and South Korea dropped between 0.82 per cent and 1.57 per cent. China bucked the trend to end 1.45 per cent higher.
Europe was lower as volatility in oil price continued to weigh. Key indices in France, Germany and the UK fell by 1.45 per cent to 2.61 per cent. .
