MUMBAI: Market benchmark BSE Sensex on Tuesday plunged by 538 points to register its worst single day loss in 16 months and close below 27,000-mark as foreign investors, already confounded ahead of a crucial U.S. Fed meeting, were spooked by a rate hike in Russia amid sinking oil prices.

Traders said domestic concerns like widening trade deficit and free-fall of rupee also added to worries of FIIs who booked profit across sectors. The domestic currency tumbled by 59 paise to 13-month low of 63.53. The 30-share BSE index resumed the day sharply lower in line with weak Asian cues and remained under selling pressure throughout the day.

It finally closed at at 26,781.44, a steep fall of 538.12 points or 1.97 percent. The previous worst single day loss was logged on September 3, 2013 when Sensex tanked by 651.47 points. Selling pressure was so intense that 10 out of 12 indices ended the day with losses in the range of 1.44 percent and 4.17 percent, with metal, realty, FMCG, banking, consumer durable, healthcare and power being the worst hit. Shares of software exporters, which would benefit from rupee fall, ended higher along with and teck firms.

Sesa Sterlite was the biggest loser among 30 Sensex stocks at 7.77percent. Dr Reddy's tanked 6.32%, Hindalco lost 5.67 percent and SBI 4.66 percent. Tata Power (4.59 percent), ICICI Bank (4.30 percent) NTPC (3.20 percent), ITC Ltd (3.13 percent), Tata Steel (2.82 percent) and HDFC Ltd (3.11 percent) were the other big loers. TCS notched up a gain of 3.40 percent, while Infosys was up by 0.69 percent. "Weak Asian markets, poor economic indicators from the domestic economy, liquidity roll-back fears due to Fed meeting and surprise rate hike by Russian central bank kept the global markets in turmoil for the day," said Rakesh Goyal, Senior Vice President, Bonanza Portfolio.