The trading sentiment was also effected by a slow-down in foreign fund flows in Indian equities over last few sessions, displaying the general cautious stance adopted by FIIs, fearing the fallout of Ireland's debt crisis.
The Sensex, which had lost over 444 points early this week, tumbled further by 345.20 points to 19,585.44, a level last seen on September 17.
Similarly, the broad-based National Stock Exchange index Nifty broke psychological 5,900 points level, dropping by 108.50 points to 5,890.30, as the government faced censure over its handling of 2G license allocation.
A mixed pattern in Asia and lower opening in Europe spurred by Irish debt crisis, further fuelled the downward trend of the bourses.
Poor stock markets inning was driven by steep fall in the leading stocks of Reliance Industries and Infosys Technologies, as well as broadly poor performance of telecom, realty and refinery sector stocks.
Reliance Industries dropped by 3.46 per cent to Rs 996.85 and Infosys by 1.25 per cent to Rs 2,966.45. The two carry nearly 23 per cent weightage on Sensex.
In the 30-share BSE index, 26 stocks suffered loses while four ended with gains. Rcom, the second-largest mobile- phone operator, and Unitech Ltd, which has a phone venture with Telenor, declined to its five-month low on deepening crisis over the 2G spectrum licence allotment.
Rcom tanked 3.57 per cent to Rs 148.40 while Unitech plunged by 4.56 per cent to Rs 67.95.
The realty sector index suffered the most by losing 3.84 per cent to 3,173.57 followed by oil and gas sector that plunged by 2.59 per cent to 10,227.47.
In the current market turmoil, the Reliance pack under the leadership of both the Ambani brothers remained under selling pressure.
Besides, Reliance Industries and Rcom, the shares of Reliance Infra, Reliance Capital, Reliance Industrial Infra, Reliance Natural Resources, Reliance Power and Reliance Media stocks were also under selling pressure on profit- booking.
As selling pressure spread on wider level, smallcap index dropped by 2.08 per cent to 10,237.29 and midcap index by 1.99 per cent to 8,077.36.