The Sensex dived 812 points while the Nifty closed below the 11,300-mark on Monday, in tandem with a global selloff after a resurgence of coronavirus cases in Europe stoked fears of another round of lockdowns.
Denmark, Greece and Spain have imposed fresh restrictions on activities to tackle a surge in COVID-19 infections. Britain too is considering a second nation-wide lockdown, prompting investors in Europe to offload travel, consumption and banking stocks.
Falling for the third straight session, the 30-share BSE Sensex index ended 811.68 points or 2.09 per cent lower at 38,034.14.
Similarly, the NSE Nifty tumbled 254.40 points or 2.21 per cent to finish at 11,250.55.
IndusInd Bank was the top loser in the Sensex pack, tanking 8.67 per cent, followed by Bharti Airtel, Tata Steel, ICICI Bank, M&M, Maruti, Axis Bank and Bajaj Finance.
Only three index components ended in the green -- Kotak Bank, Infosys and TCS, rising up to 0.86 per cent.
Banking stocks fell on Monday after the release of the FinCEN files, which showed that some Indian banks helped facilitated transactions that had been red-flagged between 2010 and 2017 by the US Treasury Department to the Financial Crimes Enforcement Network (FinCEN). These transactions, which involved banks across the globe, included suspected financial fraud, terrorism, money laundering and more.
The market capitalisation of all BSE-listed companies fell to Rs 1,54,76,979.16 crore, wiping off Rs 4.23 lakh crore of investor wealth.
"Indian benchmark indices succumbed to profit booking in the second half of the trading day and ended more than 2 per cent down. It was in sync with global cues which turned negative following a surge in infections in various countries including in Europe.
"Additional restrictions were being considered in Europe following an increase in infections. With high valuations and worries that earnings may not justify such valuations anytime soon, markets may trade uncertain for the time being. Stay cautious," said Vinod Nair, Head of Research at Geojit Financial Services.
All sectoral indices ended in the red, with BSE telecom, realty, metal, auto, healthcare and basic materials cracking up to 5.77 per cent.
Broader BSE midcap and smallcap indices crashed as much as 3.61 per cent.
In rest of Asia, bourses in Shanghai, Hong Kong and Seoul ended significantly lower. Stock exchanges in Europe witnessed heavy selloff in opening trade, declining up to 3 per cent. Meanwhile, global oil benchmark Brent crude was trading 2.04 per cent lower at USD 42.27 per barrel. In the forex market, the rupee strengthened 7 paise and closed at 73.38 against the US dollar.
Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services, said that the global cues were negative at the start of the day with lofty valuations, fading US stimulus and fresh wave of coronavirus infections in Europe being major risks.
"In the US, attention is turning back to negotiations on fresh stimulus and the forthcoming election. Further, European markets fell after a report on bank allegations and signs that London is heading for a second lockdown," he added.
On the domestic front, weak global cues and profit booking ahead of the monthly F&O expiry this week dragged the market, Khemka said.
Analysts said that going forward, the market would continue with its cautiousness as investors would keep a close watch on the rising Covid cases and delay in US stimulus.
With inputs from agencies