The Sensex and the Nifty fell more than 1 per cent for a third consecutive session on Wednesday, pushing indexes to their lowest since May 2014 as state-run lenders were hit hard by a slew of earnings that showed a spike in bad loans and provisions for sour debt.
The broader NSE index ended lower by 82.5 points or 1.13 per cent at 7,215.70. It is currently trading at levels last seen when Prime Minister Narendra Modi was elected.
The index is already down 3.7 per cent for the week, heading for its biggest weekly fall since a 4.5 per cent fall in the first week of the year.
The benchmark BSE index plunged 262.08 points or 1.09 per cent to 23,758.90.
State Bank of India fell ahead of December quarter earnings, due on Thursday.
All BSE sectoral indices ended in the red. Among them, realty index fell the most by 3.46 per cent, followed by banking 2.04 per cent, infrastructure 1.9 per cent and PSU 1.66 per cent.
Top five Sensex losers were Tata Motors (-6.04%), State Bank of India (-4.82%), Adani Ports (-3.57%), HDFC (-3.24%) and Cipla (-3.17%), while the major gainers were Coal India (+1.57%), L&T (+0.73%), Maruti (+0.72%), Reliance (+0.61%) and M&M (+0.15%).
Traders say global slowdown and China worries have been a drag, but disappointing earnings especially from state-run banks have made things gloomy for domestic markets.
"Earnings season hasn't been robust so far. Global uncertainties, China slowdown are making things worse for us," said Jagannadham Thunuguntla, Head of Fundamental Research at Karvy Group.
A report by SMC Global said: "Asian stocks dropped as a week of volatile trading in global equities continued, with Japanese shares extending losses after the biggest one-day plunge since August. US stocks finished Tuesday's volatile session little changed as a rally in materials was offset by losses in the energy sector fuelled by a fresh drop in oil prices amid a global stock sell-off.With a drop in inventories of durable goods more than offsetting an uptick in inventories of non-durable goods, the Commerce Department released a report on Tuesday showing a modest decrease in US wholesale inventories in the month of December. The report said wholesale inventories edged down by 0.1 per cent in December after sliding by a revised 0.4 per cent in November. The modest drop in inventories matched economist estimates."
European shares rebounded on Wednesday from two-year lows reached in the previous session, helped by some solid corporate earnings and a recovery in Deutsche Bank.
The pan-European FTSEurofirst 300 index, which had fallen 1.6 per cent to its lowest point since September 2013 on Tuesday, rose 1.5 per cent.
Asian stocks dipped early on Wednesday amid growing concerns about the health of the global banking sector, particularly in Europe, while the safe-haven yen stood near a 15-month high versus the dollar.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7 per cent.