After a lower start, the BSE Sensex plunged by 524.09 points to 18,034.04 at 1300 hrs as the Indian rupee hit a new record low of 65.94 (intra-day) against the dollar.
On similar lines, the wide-based NSE Nifty dropped by 163.75 points to 5,312.75, led by stocks of banking and capital goods sector.
Brokers said the foreign funds remained net sellers, which gathered momentum sparked by the Indian rupee hitting new record low levels.
They said the passage of the Food Bill in Lok Sabha raised fears the government might face more subsidy burden, leading to widening of the current account deficit (CAD).
All sectoral indices, barring information technology exporters, on expectations of higher revenue following stronger dollar, remained in red zone.
Major losers were State Bank of India (SBI), HDFC Bank, ICICI Bank, Bharat Heavy Electricals Ltd (BHEL), Larsen & Toubro, Coal India, Hero MotoCorp, Hindalco Industries Ltd, ITC Ltd, Maruti Suzuki India, NTPC, Sun Pharmaceuticals Industries and Bharti Airtel.