Investors fretted over the impact of the lockdown in different parts of the country amid rising number of coronavirus cases and their fallout on the country's economic activities.
The 30-share Sensex tumbled 3,934.72 points or 13.15 per cent to close at 25,981.24, the worst ever decline in one day.
In the first hour of trade on Monday, the benchmark indices cracked over 10 per cent, triggering a 45-minute trading freeze.
From the bank index, Axis Bank was hit hard the most, tanking 28 per cent.
Likewise, Federal Bank plummeted 24.03 per cent, IndusInd Bank (23.50 per cent), City Union Bank (19.99 per cent), ICICI Bank (17.88 per cent) and RBL Bank (17.67 per cent).
SBI shed 13.38 per cent while HDFC Bank and Kotak Mahindra Bank dropped 12.68 per cent and 11.66 per cent, respectively.
Tracking losses in these companies, the BSE Bank index dropped 16.81 per cent.
Another index which received severe drubbing was the BSE Finance which crashed 16.06 per cent.
From the finance index, Mahindra & Mahindra Financial Services cracked 28.91 per cent and Max Financial Services declined 26.48 per cent.
Bajaj Finserv settled 26.44 per cent down while Equitas Holdings fell 25.29 per cent, Bandhan Bank (24.68 per cent) and Shriram Transport Finance Company (18.90 per cent).
"Post a sharp rally last Friday, Indian equity markets again witnessed bloodbath today, hitting a lower circuit in the first hour of the trade. The downtrend continued even after the trading was resumed.
"The benchmarks recorded the worst single-day fall. Investors continued to worry over the impact of the rapidly spreading coronavirus outbreak on global economic growth," Siddhartha Khemka, Head (Retail Research) at Motilal Oswal Financial Services Private Ltd said.
According to him, increase in domestic shutdowns to contain the virus also weighed on the sentiment. SUM RAM