The 30-share stocks barometer Sensex, which had lost 529.35 points in the previous session, plunged by another 724.62, or 5.78 per cent to close at a two-year low of 11,801.70. Funds indulged in all-round selling in heavy-weight stocks of consumer durables, metals, capital goods and realty sectors. Sensex touched the day's low of 11,732.97 and a high of 12,284.49 points.
The wide-based National Stock Exchange index Nifty dropped by 215.95 points, or 5.66 per cent at 3,602.35 after dipping to a low of 3,581.60 during the session.
Marketmen and analysts said the sentiment turned distinctly weak after reports that credit crisis deepened in Europe, adding to concern that global economic growth will slow. Germany announced a new bailout package totalling 50 billion euros for Hypro Real Estate, the country's second biggest commercial property lender and the UK said it would rescue its lenders.
They said depreciating rupee against the US dollar too had downward effect on the stock prices.
All the sectoral indices, led by consumer durables goods, metals and realty fell between 3.50 to 11 per cent.
The BSE Consumer Durables index suffered the most with a fall of 318.06 points, or 11.01 per cent at 2,569.60 as Gitanjali Gems fell by 16.75 per cent at Rs 155.85, Titan Industries lost 11.48 per cent at Rs 953.85 and Videocon Industries tumbled 9.99 per cent at Rs 185.50.