Closing Bell: Sensex closed 1,158 points lower at 59,985 and Nifty lost 354 points to end the day at 17,857 levels

Meanwhile, Morgan Stanley has become the latest foreign brokerage - after Nomura and UBS - to downgrade Indian equities. “We move tactically EW on India equities after strong relative gains - we expect a structural multi-year earnings recovery, but at 24x fwd P/E we look for some consolidation ahead of Fed tapering,an RBI hike in February and higher energy costs,” it said in a note.

Financial shares, mainly PSU banks, metals and realty shares bore the brunt of the selling pressure today.The broader indices also cracked in trade, with the NSE Midcap 150 index down 1.7 per cent, and the Smallcap 250 index down 1.6 per cent. India VIX jumped 6.4 per cent to 17.91.

Among sectors, the NSE PSU Bank index tanked over 5 per cent. The Bank Nifty, Realty and Metal indices slumped around 3.5 per cent each. All sectoral indices on the NSE were down over a per cent each, with FMCG, Media, Pharma and Oil & Gas as the other prominent losers.

ITC was the biggest percentage loser among the Sensex 30 stocks, it ended 5.5 per cent lower at Rs 225. ICICI Bank, Kotak Bank and Axis Bank tumbled around 4 per cent each.

SBI, HDFC Bank, Titan, NTPC, Sun Pharma, Tech Mahindra, Bajaj Auto, HCL Technologies, Bharti Airtel, Tata Steel and PowerGrid Corporation were the other major losers, down 2-3 per cent each.

On the other hand, IndusInd Bank was the major Sensex gainer, up 3 per cent at Rs 1,175. Larsen & Toubro, UltraTech Cement and Asian Paints were the other significant gainers.