The benchmark BSE Sensex plunged nearly 310 points to crash below the psychologically important 25k-level for the first time in 15 months and the Nifty cracked the 7,600-level as intense selling remained unabated on global growth worries.
A sharp fall in rupee value against the dollar as well as fears about a slowdown in China and growth concerns continued to rattle investors sentiment.
The domestic currency was trading at a fresh two-year low of 66.83 per dollar.
Among BSE sectoral indices, healthcare index plunged the most by 2.57 per cent, followed by metal 2.31 per cent, banking 2.1 per cent and power 1.92 per cent.
Major Sensex losers were Axis Bank (-3.9%), VEDL (-3.59%), ICICI Bank (-3.34%), Hindalco (-3.05%) and Lupin (-2.96%), while the only four gainers were HDFC (+0.64%), Tata Motors (+0.23%), ONGC (+0.18%) and Maruti (+0.07%).
Emerging market stocks stumbled to the lowest in almost two weeks on Monday with many Asian bourses suffering steep losses, dragged down by another sharp fall in Chinese mainland shares
European stocks rose on Monday, led by a surge in mining and commodities giant Glencore after it pledged to slash its debt by a third, but a fall in China after markets reopened after a four-day break dragged down Asian bourses.
Asian stocks were subdued after China revised its annual economic growth rate in 2014 to 7.3 per cent from the previously released figure of 7.4 per cent.
"The outlook is (still) negative but the market is oversold. That's the key reason why we are holding on," said Alex Mathews, head of research at Geojit BNP Paribas.
"Because of the absence of any positive triggers, the market could remain subdued or trade sideways".
Indian domestic institutional investors have somewhat cushioned the exodus of foreign investors, aggressively buying on every dip. But data suggest that their war chest might not be enough to counter foreign investor outflows.
A report by SMC Investments and Advsiors said: "Asian stocks fell, with the regional benchmark index heading for its lowest close since November 2012, as a stronger yen weighed on shares in Tokyo and investors awaited the resumption of trading in China following a holiday. Emerging market growth concerns continues to haunt investors across the globe and recent growth downward revision for the year 2014 by China to 7.3% from 7.4% further added to woes that the Chinese economy is experiencing deep economic slowdown."