"Cyclicals, including financials, metals, energy, industrials and auto, came under selling pressure as hopes of a quick stimulus package faded," Deepak Jasani of HDFC Securities said.
The Sensex fell by 267.64 points or 0.72 per cent to 37,060.37, while the Nifty declined by 98.30 points or 0.89 per cent to 10,918.70.
"An extended slowdown in the domestic economy has increased the volume of stressed assets in segments like industrial, infrastructure and financials. While weak international prices in segments like metals, oil & gas and exports are increasing the volatility of the market," said Vinod Nair, Head of Research, Geojit Financial Services.
Nair added that India was ending as a weak performer given the subdued business outlook and lack of revival in the short-term and action-packed reforms will be required to change the momentum.
Yes Bank closed 8.64 per cent lower at Rs 71.20 apiece as investors distanced themselves from the counter after a disclosure regarding irregularities and unauthorised transactions at CG Power and Industrial Solution.
Yes Bank holds 12.8 per cent stake in CG Power, which hit the lower circuit for the second straight day on Wednesday.
IndiaBulls Housing Finance ended 8.94 per cent lower at Rs 520 per share and Tata Motors finished at the bottom losing 9.57 per cent to Rs 123 apiece.
Asian markets largely declined on Wednesday after the US indexes pulled back overnight on recession fears. Deep-seated worries among investors, from Italian politics to Brexit to US-China conflict, are threatening to blow out rather than blow over and are unnerving investors, analysts noted.
Foreign Institutional Investors (FIIs) sold scrips worth Rs 770.81 crore while the Domestic Institutional Investors (DIIs) offloaded stocks worth Rs 353.97 crore.
( With inputs from IANS )