The 50-issue Nifty stumbled by 109.10 points, or 1.36 percent, to end below 8K-mark at a 3-week low of 7,932.90. This is its worst show since August 1 when it fell 118.70 points. Smallcap and midcap stocks, which in previous sessions had bucked a weak trend, saw a huge sell-off with their indices falling over 3% each.

"Market players will be looking for clues on the timing of the first U.S. rate hike in more than eight years. Consensus is that the Fed will hike interest rates next year and it may declare the timelines today," said HDFC Securities in a note. In Asia, barring KOSPI, all major markets ended in the red on Fed rate hike fears and weak China data. Europe saw major benchmarks trading 0.4-0.6 percent lower.

Oil Marketing Companies (OMCs) were at the receiving end on speculation fuel prices will not be touched till Maharashtra and Haryana elections are over. IOC, HPCL and BPCL fell. Foreign Portfolio Investors (FPIs) sold shares worth a net 74.59 crore yesterday as per the provisional data.

Jignesh Chaudhary, Head of Research, Veracity Broking Services said: "Local indices gave up over one percent, retreating from record highs touched last week. Market continues to be in profit booking mode and are trading cautiously ahead of Fed meeting outcome late Wednesday."

Key benchmark indices in Singapore, Taiwan, Japan, Hong Kong and China fell by 0.35 percent to 1.82 percent while South Korea's Kospi rose by 0.75 percent. Back home, major Sensex losers include Tata Power (5.85 percent), Tata Steel (3.45 percent), Axis Bank (3.14 percent), ONGC (2.98 percent), L&T (2.79 percent), NTPC (2.68 percent), Tata Motors (2.47 percent) and SBI (2.31 percent). RIL (2.23 percent), Coal India (2.22 percent), Gail (2.14 percent), Hindalco (1.90 percent), BHEL (1.75 percent), ICICI Bank (1.65 percent), Cipla (1.60 percent), Wipro (1.47 percent), HDFC (1.40 percent) and HDFC Bank (1.13 percent) also fell.

Dr Reddy's Lab, however, rose 1.15 percent on defensive buying. ITC, Infosys, Airtel, HUL, Sun Pharma and M&M also rose. Among BSE sectoral indices, Realty fell by 3.42 percent, followed by Power 3.26 percent, Capital Goods 2.70 percent, Oil&Gas 2.67 percent, Consumer Durables 2.56 percent, Metal 2.31 percent, Bankex 2 percent and Auto 1.73 percent.

Total market breadth turned negative as 2,230 stocks closed in the red while 803 finished in the green.