The 30-share BSE Sensex plunged 2,713.41 points or 7.96 per cent to finish at 31,390.07.
Likewise, the broader NSE Nifty gave up the 9,200 level, slumping 757.80 points or 7.61 per cent to end at 9,197.40.
This was the second biggest drop for the benchmarks in absolute terms. The Sensex and Nifty had plummeted 2,919.26 points and 868.25 points respectively on March 12.
Asian markets nosedived after China's factory output and retail sales data came in sharply lower, fanning fears of a coronavirus-triggered economic slump.
Meanwhile, the US Fed on Sunday made its second emergency rate cut in less than two weeks, slashing the benchmark borrowing rate to a range of 0-0.25 per cent, where it was during the 2008 global financial crisis.
Dalal Street was buzzing with speculation of an inter-meeting rate cut by the RBI as well after Governor Shakitkanta Das called a press conference post market hours.
However, the Reserve Bank stopped short of announcing a rate cut but hinted at doing so at the next MPC meeting on April 3, even as it rolled out more liquidity enhancing measures.
All Sensex components ended in the red. IndusInd Bank was the top loser, skidding 17.50 per cent, followed by Tata Steel (11.02 per cent), HDFC (10.94 per cent), Axis Bank (10.38 per cent) and ICICI Bank (9.96 per cent).
"Easing monetary policy action from central banks across the globe highlights that the impact of coronavirus is worse than thought. Economic, trade and travel shutdown are impacting equities across the globe," said Vinod Nair, Head of Research at Geojit Financial Services.
All sectoral indices closed with losses, with BSE metal, bankex, finance, realty, IT and energy indices dropping up to 9.30 per cent.
Broader mid-cap and small-cap indices fell up to 5.94 per cent.
Elsewhere in Asia, bourses in Shanghai dropped 3.40 per cent, Hong Kong 4.03 per cent, Seoul 3.19 per cent and Tokyo cracked 2.46 per cent.
European bourses too tumbled up to 8 per cent in opening trade as much of the region went into shutdown mode.
Brent crude oil futures melted 7.53 per cent to USD 31.30 per barrel.
The rupee depreciated 55 paise to 74.31 per US dollar (intra-day).
Covid-19 has claimed over 6,000 lives and infected more than 1,62,000 people across the globe.
The number of infected cases in the country stood at 110 on Monday, the Union Health Ministry said. ANS ABMABM