Domestic benchmark equity index plunged over 1,600 points on Monday, posting its biggest intraday fall in seven years amid a massive sell-off in global markets.

The BSE Sensex was down 1624.51 points or 5.94% to close at 25,741.56, while the NSE Nifty fell 490.95 points or 5.92% to end the day at 7,809.

According to reports, nearly Rs 7 lakh crore got wiped out from the investors' wealth in the worst-ever carnage in Indian stock market.

The sell-off was mainly triggered by a crash in the Chinese stock markets, which fell by over 8% on concerns over slowing economy in the country.

"Global investors are panicking and redeeming their investments in emerging markets, including those in India," says Nirmal Jain, chairman and managing director IIFL.

"This is a bull market correction and the trend has not reversed yet," Jain said.

Meanwhile, the Asian stock markets tumbled to three-year lows, as worries over yuan devaluation by China hit the sentiments. About two weeks ago, Chinese authorities had opted for a currency devaluation in a bid to revive the country's slumping exports.

"The Chinese depreciation has suddenly sparked concerns about competitive devaluation but the disappointing China Purchasing Managers' Index (PMI) numbers that came out last week has also ignited the concerns about a China slowdown and the impact that they will have on rest of the region's growth prospects," Khoon Goh of ANZ Research told CNBC-TV18.

The Indian rupee also hit a fresh two-year low of Rs 66.47 against the dollar amid huge outflows from the domestic stock markets.

"I am afraid there is going to be further pressure on emerging market currencies. I do not think this is necessarily the end of it," Goh said.

To ease concerns over the continued depreciation in rupee, the Reserve Bank of India (RBI) governor Raghuram Rajan said that "the Reserve Bank will not hesitate to use its USD 380-billion foreign-exchange reserves to jag out volatility".

"India is in a better position compared to other markets," Rajan said.

While gold prices rose to seven-week high underpinned by increase in safe-haven demand for the demand, Brent crude oil prices drop below the key support level of $45 per barrel, posting a fresh 6-1/2-year lows.

"India's economy will benefit from lower commodity prices, particularly lower crude prices and so investors should not panic," Nirmal Jain said.