The BSE Sensex settled 715.06 points, or 0.92 percent, lower at 76,755.05, while the NSE Nifty50 declined 191.45 points, or 0.79 percent, to close at 23,996.25.
Market breadth remained weak, with most sectoral indices ending in negative territory. The Nifty Smallcap 100 fell 1.02 percent, while the Nifty Midcap 100 slipped 0.79 percent.
Among sectoral indices, all ended in the red except the Nifty Auto index, which posted marginal gains.
On the Nifty50, nearly 40 stocks closed lower. InterGlobe Aviation (IndiGo), Dr. Reddy's Laboratories, and Jio Financial Services were among the biggest losers, declining by as much as 4 percent.
On the gaining side, Bajaj Auto, Nestlé India, and Tata Consumer Products emerged as the top performers, rising by up to 6 percent.
Investor sentiment was also impacted after US President Donald Trump announced that the United States would impose a 100 percent tariff on all generic drugs imported into the country from August 1, 2028, with the tariff set to increase to 200 percent from the following year.
Meanwhile, Brent crude oil surged 4 percent to USD 94.72 per barrel, its highest level in more than five weeks, raising concerns over inflation and import costs for oil-dependent economies.
The Indian rupee weakened by 11 paise to close at 96.36 against the US dollar.
Market volatility also increased, with the India VIX, the volatility index, rising more than 6 percent to 13.39.
In the broader market, Emami Paper Mills shares hit the 20 percent upper circuit after the company reported strong quarterly earnings