The market on Thursday witnessed the weakest session of the Dalal Street as the Sensex closed with a sharp fall of 806.47 points to 35,169.16.
The 50-share Nifty plunged to a further 259 points to trade in red at 10,599.30.
With more than two shares declining for every share rising on the BSE, some of the shares including HPCL, BPCL and IOC were amongst the biggest losers.
The Indian rupee also recovered from its day's low to trade at 73.59 against the US dollar, down 25 paise from previous close of 73.34 a dollar. The currency hit record low of 73.82 on consistent dollar demand.
Earlier in the day, Finance Minister Arun Jaitley announced a cut in the excise duty of petrol & diesel by Rs 1.50 per litre.
"Oil marketing companies will absorb Re 1 per litre w.r.t petrol & diesel prices," he said.
He added that several macroeconomic data is indicating stable measures. The first quarterly results have shown an 8.2% growth.
"Inflation is still moderate less than 4%," added Jaitley.
From the banking sector, ICICI Bank traded 5% with an upward trend as Chanda Kochhar announced her exit as the Chief Executive Officer.
The bank in a statement noted that Board of Directors accepted the request of Chanda Kochhar (MD and CEO) to seek early retirement.
It further said the enquiry instituted by the board will remain unaffected by this and certain benefits will be subject to the outcome of the enquiry.