Equity indices faced heavy drubbing on Thursday after an initial rally, with the Sensex tanking 1,045.60 points amid a largely bearish trend overseas after the US Federal Reserve hiked rates by 75 basis points.

Across-the-board selling played havoc on the headline indices, with index majors Reliance Industries and HDFC twins contributing most to the decline.

Despite a smart rally in morning trade, the BSE benchmark failed to hold on to the gains and plummeted 1,045.60 points or 1.99 per cent to settle at 51,495.79 -- its fifth day of decline.

During the day, it tumbled 1,115.91 points or 2.12 per cent to its one-year low of 51,425.48.

On similar lines, the NSE Nifty plunged 331.55 points or 2.11 per cent to close at 15,360.60.

From the Sensex pack, Tata Steel, Tech Mahindra, IndusInd Bank, Wipro, Bharti Airtel, Bajaj Finance, Kotak Mahindra Bank and NTPC were the biggest laggards.

Nestle India was the only gainer.

Elsewhere in Asia, markets in Shanghai and Hong Kong settled lower, while Tokyo and Seoul ended marginally higher.

Markets in Europe were trading sharply lower in mid-session deals.

Stock exchanges in the US ended with sharp gains in the overnight session on Wednesday despite the rate hike by Fed.

"The early gains led by an in-line Fed policy was dampened as recessionary fears haunted global sentiments," said Vinod Nair, Head of Research at Geojit Financial Services.

Meanwhile, international oil benchmark Brent crude dipped 0.66 per cent to USD 117.68 per barrel.

Foreign institutional investors (FIIs) remained net sellers in the capital market, as they sold shares worth Rs 3,531.15 crore on Wednesday, as per exchange data.