Benchmark Sensex on Monday crashed nearly 6 percent or over 2,000 points in line with massive selloffs on global bourses as a flare-up in US-China tensions and a further extension of nationwide lockdown dampened investor sentiment.
Posting its biggest single-day drop in over a month, the 30-share BSE index settled at 31,715.35, plunging 2,002.27 points, or 5.94 percent.
Likewise, the the broader NSE Nifty suffered a heavy loss of 566.40 points, or 5.74 per cent, to settle at 9,293.50.
On the Sensex chart, ICICI Bank was the top laggard, sinking over 10 per cent, followed by Bajaj Finance, HDFC, IndusInd Bank, Axis Bank and Maruti.
Only 2 out of the 30 Sensex constituents managed to register gains at the close of trade. Bharti Airtel and Sun Pharma were the gainers.
Shares of Reliance Industries fell over 2 per cent after the oil-to-telecom conglomerate on Thursday posted its biggest ever drop in quarterly net profit.
Its net profit in January-March dropped 37 per cent to Rs 6,546 crore, the lowest in three years.
Meanwhile, earlier in the day, Silver Lake - one of the world's largest tech investors - agreed to invest Rs 5,655.75 crore to buy a 1.15 per cent stake in Jio Platforms.
Sectorally, BSE finance, bankex, metal, consumer durables, realty and auto indices plunged up to 8.26 per cent, while telecom and healthcare indices rose up to 2.39 per cent.
In the broader market, midcap and smallcap cracked up to 4.25 per cent.
In a fresh jolt to global economic recovery hope, claims by the US with regard to COVID-19 sparked fears of a renewed trade war with China over its role in the pandemic spread.
US Secretary of State Mike Pompeo on Sunday said there was a significant amount of evidence that the coronavirus emerged from a Chinese laboratory.
Pompeo's comments came after US President Donald Trump last week threatened that he will slap new tariffs on China over the COVID-19 pandemic.
Back home, the extension of nationwide lockdown until May 17 kept investors edgy as they fear that the economy and businesses will take longer to get back on track once the curbs are completely lifted.
Sentiments also remained downbeat after the country's manufacturing activity growth declined sharply in the month of April 2020, amid national lockdown restrictions to help stem the spread of coronavirus infections.
The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) fell to 27.4 in April, from 51.8 in March, reflecting the sharpest deterioration in business conditions across the sector since data collection began over 15 years ago.
"In sync with global markets, the Indian benchmark indices lost around 5.6 per cent with an increase in the volatility index by around 28 per cent. Globally, rising trade war tensions between US and China and domestically, dire economic news added to the negativity, Vinod Nair, head of Research at Geojit Financial Services, said.
The extension of the lockdown and the fear that the economy and businesses will take longer to get back on track also impacted the markets, he said adding that the Indian market will continue to be driven by global news flow and domestic earnings commentary ".
On the global markets front, bourses in Japan and China were closed for holidays.
While, Hong Kong and Seoul plunged up to 4 per cent, Europe opened with significant losses.
Meanwhile, the rupee depreciated by 64 paise to provisionally settle at 75.73 against the US dollar.
International oil benchmark Brent crude futures were trading 2.95 percent lower at USD 25.66 per barrel.
The death toll due to COVID-19 in India rose to 1,373 and the number of cases climbed to 42,533 in the country, according to the health ministry.
The global tally of coronavirus infections was over 35 lakh, with around 2.47 lakh deaths.