The Sensex, which had lost 435 points in the previous day's trading, lost another 257.31 points at 14,265.53 as heavyweights like Reliance Industries and Tata Steel recorded hefty losses. It touched the day's low of 14,188.25 points.

Similarly, the 50-share National Stock Exchange index Nifty lost 104.75 points at 4,251.40. It touched the day's low of 4,222.15.

The fall was led by Reliance Industries after UBS cut its rating and said any further gains in local equities would be limited.

Major market players were also seen booking profits at existing higher levels as they judged the current rally of over 80 per cent since March 9 was overdone.

Reliance Industries' stock slid 1.26 per cent after UBS said oil-refining profit may drop. Tata Steel, the biggest steelmaker, sank 6.71 per cent. Stocks retreated despite the inflation rate becoming negative for the first time in three decades, giving the government the scope to spend more in next month’s budget.