Also, fresh foreign fund outflows dampened the mood.
The BSE Sensex tanked 561.05 points to 70,939.71. The Nifty plunged 165.6 points to 21,406.35.
The heavy fall in the markets comes on the back of a recent record-breaking rally. The BSE benchmark hit an all-time high of 73,427.59 on Tuesday, and the Nifty also reached its lifetime peak of 22,124.15 the same day.
Among the Sensex firms, Power Grid, Asian Paints, Wipro, HDFC Bank, HCL Technologies, IndusInd Bank, NTPC, and JSW Steel were the major laggards.
Axis Bank, Bharti Airtel, UltraTech Cement, Tata Motors and Reliance Industries were the gainers.
In Asian markets, Shanghai quoted lower while Seoul, Tokyo, and Hong Kong were trading in the positive territory.
The US markets ended lower on Wednesday.
Foreign Institutional Investors (FIIs) offloaded equities worth ₹10,578.13 crore on Wednesday, according to exchange data.
“At elevated valuations the market needs only a trigger for a sell-off and yesterday this trigger came in the form of HDFC Bank’s worse-than-expected results. It is also important to understand that there was a sell-off in other emerging markets like Taiwan and Korea indicating that this is an emerging market correction driven by FPI (Foreign Portfolio Investors) outflows.
“The FPI sell figure in India yesterday was huge at ₹10,578 crore. In the context of rising bond yields in the US, FPIs may sell again. But this is likely to be countered by DII (Domestic Institutional Investors) buying in fairly valued large caps with growth potential,” V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.
On Wednesday, the BSE benchmark plunged 1,628.01 points, or 2.23 per cent, to settle at 71,500.76. The Nifty tanked 460.35 points or 2.09 per cent to settle at 21,571.95.
Global oil benchmark Brent crude climbed 0.26 per cent to $78.08 a barrel.