The S&P BSE Sensex index fell as much as 489.53 points from an intraday high of 38,923.78 touched in early deals to hit 38,434.25 on the downside.
The broader NSE Nifty benchmark hit 11,406.50 at the day's weakest level, declining as much as 147.7 points from an intraday high of 11,554.20.
Losses in information technology and metal shares dragged the markets lower however gains in energy and select auto stocks arrested the fall.
Equities in other Asian markets ticked up as some investors clung to hopes that China and the US could work towards reaching a deal on trade and other issues in the fourth quarter.
Japan's Nikkei rose 0.6 per cent while MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.11 per cent. Chinese markets will be shut for a week from Tuesday to mark 70 years since the founding of the People's Republic of China.
On Monday, the Sensex and Nifty had ended 0.40 per cent and 0.33 per cent lower respectively.