Benchmark Sensex tanked 356 points to close at a one-week low of 37,165.16 today, while the NSE Nifty ended below the 10,300-mark on widespread selling amid weak global cues.
Asian and European stocks dropped as the latest escalation in the Sino-US trade spat weighed on investor sentiment.
Heavy selling by foreign and domestic institutional investors after RBI's rate hike yesterday added to the selling pressure.
The 30-share Sensex stayed in the negative zone for the whole day and ended at 37,165.16, showing a loss of 356.46 points, or 0.95 per cent.
This is its lowest level since July 26, when it had closed at 36,984.64.
The gauge had lost 84.96 points in the previous session.
The broader Nifty too succumbed to selling pressure and hit a low of 11,234.95, before ending at 11,244.70, down 101.50 points, or 0.89 per cent.
Profit-booking by participants in view of the domestic markets' recent record-setting run fuelled the downtrend, brokers said.
On a net basis, foreign portfolio investors (FPIs) sold shares worth Rs 95.94 crore, while domestic institutional investors (DIIs) offloaded equities to the tune of Rs 562.33 crore yesterday, provisional data showed.