Equity market benchmark indices Sensex and Nifty crashed over 3 per cent each on Monday in line with extremely weak trends in global markets amid fears of a slowdown in the US economy.
An over 12 per cent plunge in Japan's Nikkei also dented markets' sentiment badly.
The 30-share BSE Sensex tanked 2,686.09 points or 3.31 per cent to 78,295.86 during the afternoon trade. The NSE Nifty tumbled 824 points or 3.33 per cent to 23,893.70.
Investors' wealth eroded by Rs 17.11 lakh crore during the afternoon trade to Rs 4,40,04,979.86 crore.
In Asian markets, Seoul, Tokyo, Shanghai and Hong Kong were trading sharply lower.
Japan's Nikkei 225 share index plunged more than 12 per cent on Monday as investors worried that the US economy may be in worse shape than had been expected dumped a wide range of shares.
It dropped 5.8 per cent on Friday and has now logged its worst two-day decline ever, dropping 18.2 per cent in the last two trading sessions.
The US markets ended significantly lower on Friday. From the Sensex pack, Tata Motors slumped 6 per cent. Adani Ports, Tata Steel, SBI and JSW Steel were the other big laggards.
However, Hindustan Unilever and Nestle were trading in positive territory.
"The rally in the global stock markets has been driven mainly by consensus expectations of a soft landing for the US economy. This expectation is now under threat with the fall in US job creation in July and the sharp rise in the US unemployment rate to 4.3 per cent. Geopolitical tensions in the Middle East also are a contributing factor," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 3,310 crore on Friday, according to exchange data.
"Anxiety remains high, especially after Friday's unexpectedly weak US July jobs report, suggesting that volatility will be the hallmark of the day," Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said.
Global oil benchmark Brent crude declined 0.90 per cent to USD 76.12 a barrel.
"The global market is reeling as bears enter with a cocktail of bad news.
The fear of a reverse Yen carry trade, following an interest rate hike in Japan, was the initial catalyst. This was compounded by fears of a recession in the USA after extremely poor jobs data, which spooked market sentiment," said Santosh Meena, Head of Research, Swastika Investmart Ltd.
Amid widespread selling pressure, the BSE benchmark plunged 885.60 points or 1.08 per cent to close at 80,981.95 on Friday. The broader Nifty of NSE dropped 293.20 points or 1.17 per cent to end at 24,717.70.
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