The 50-share Nifty index slipped below its crucial psychological level of 8250.

The losses on the benchmark indices were led by banking stocks such ICICI Bank, SBI and Axis Bank. CNX Bank Nifty plunged over 400 points in intraday trade. HDFC, Reliance Industries and L&T too contributed to the fall.

The overall market breadth was negative, with every eight out of every 10 BSE stocks quoting in the red.

The S&P BSE Midcap Index was down 1.59 per cent and BSE S&P Smallcap Index edged lower by 1.67 per cent.

All sectoral indices were trading with a negative bias, except the S&P BSE IT index, which was up 0.10 per cent. TCS contributed most to the gains. The S&P BSE Metal index was the top sectoral losers, down 2.50 per cent. Tata Motors, Bharat Forge contributed most to the falls.

The Volatility index, India VIX, which measures the market volatility also surged over 6 per cent in intraday trade.

The Volatility index, India VIX, which measures the market volatility also surged over 6 per cent in intraday trade.

On the global front, major Emerging market stocks are at 6-year lows, witnessing more out of favour than ever. As per a latest weekly data, FIIs are selling across EM Asia.

Foreign selling was recorded in all 6 EM Asia markets - Korea, Thailand, Taiwan, India, Indonesia and Philippines.

China's move to devalue yuan and the depreciation in world currencies thereafter key for risk aversion.

In Asia, bond funds see $1.2 billion of outflow and equity funds witness an outflow of $8.3 billion, said Citi.

China's Shanghai Composite was down over 3 per cent, Japan's Nikkei lost over 2.5 per cent, while Hong Kong's Hang Seng cracked over 55 points in trade today.

Continuing its losing streak, the rupee depreciated 34 paise to 65.88 against the US dollar in trade on Friday amid a global economic rout.