Snapping a two-day rally, the S&P BSE Sensex plunged by 381 points on Wednesday, tracking a fall in European markets, as fresh gun firing triggered concerns over Paris.
The Sensex closed at 25,482 points, down 1.48%, while the 50-share Nifty fell 105 points, or 1.35%, to end at 7,731.
On Tuesday, heavy gun firing was reported in Saint-Denis area in Paris after the police raided an apartment, where two suspects connected to terrorists attacks in the France's capital city last week were said to be hiding, AFP reported.
"After showing signs of a pullback, indices were unable to carry forward the momentum on Wednesday. Nifty failed to hold on to its support of 100 WMA, which indicates that selling pressure would further intensify. There are high probabilities that Nifty is heading towards September lows of 7,540. Traders are advised to avoid risky bets on the index. Stock specific activity could be considered for now," said Amar Ambani, Head of Research, IIFL.
The sell-off was also led by weakness in Asian markets due to falling commodity prices. While China's Shanghai Composite index ended 1% lower, Hong Kong's Hang Seng index fell 0.3%.
Brent crude oil prices traded near two-and-half-month lows on Wednesday, as oversupply concerns continued to dominate the oil market.
Markets also remain cautious ahead of the release of the minutes of the October policy meeting of the US Federal Open Market Committee (FOMC), which could give an indication of interest rate hike in December.
"Wednesday's main economic news will come from the FOMC minutes. It would be surprising if the FOMC were not to focus on two clear messages at the moment. Firstly, that barring a surprise, they will raise rates in December; and secondly that once they have started, they will act slowly and cautiously," said Societe Generale Cross Asset Research in a note.
Among the BSE sectoral indices, IT, Bankex and Metal were the biggest losers, declining 2.2%, 1.9% and 1.5%, respectively.
Infosys stock prices ended 3.8% lower at Rs 1,019 after the company warned over its margins coming under pressure in the third quarter of the current fiscal year.
Share prices of India's largest IT firm Tata Consultancy Services (TCS) also ended in losses, falling 1.6% to Rs 2,351.