Bank of Russia raised key interest rate to 17 percent from 10.5 percent in a desperate move to boost its currency and rescue troubled economy. Rouble's value has sunk roughly 50 percent since January, battered by Western sanctions. Analysts said Russia's economy is highly dependent on petroleum revenues. The average price of a barrel of oil has dropped below $56 down from high of $107 a few months ago, the added.

The 50-share NSE Nifty touched the day's low of 8,052.60 before settling down by 152 points, or 1.85 percent lower at 8,067.60. "What a contradiction, when domestic inflation is trending in line, providing room for rate cut sooner or later. But markets continue to fall factoring higher global risk.... "As crude price continues to fall, the concern over global growth is increasing. Profit-booking has increased from FIIs. As usual impending Fed meet (Dec 16-17), adds to volatility in equities, commodity and currency markets," said Vinod Nair, Head, Fundamental Research, Geojit BNP Paribas Financial Services.

The total market breadth was sharply negative as 2,327 shares declined while only 541 that advanced, Reflective of heavy selloff in second line counters by retail investors. "Negative global cues and weakness in currency pushed the equity markets deep in the red. Sentiments further soured in reaction to the India’s trade deficit figure, which widened to 18-month high of $16.86 billion in November," said Jayant Manglik, President, Retail Distribution, Religare Securities.

Global crude oil prices (Brent) falling below $60 a barrel for the first time since 2009 will have a ripple effect across the global financial markets and economies, analysts said. Meanwhile, foreign portfolio investors have pulled out shares worth Rs 455.72 crore yesterday, as per provisional data. Except China that closed with gains, most Asian stocks finished remarkably lower as oil's slump and weaker-than-estimated Chinese manufacturing data stoked concerns that the global economy may falter.

Key indices in Hong Kong, Singapore, South Korea, Japan and Taiwan were down by 0.39-2.4 percent. However, European markets recovered from early hesitancy and were trading higher in their early morning trade. CAC was up by 0.59 percent, DAX by 0.87 percent and FTSE by 1.11 percent.