The 30-share BSE barometer, which remained flat in the previous day's trading, dropped 523.67 points to 18,0139.49, its biggest drop since January 22 when 28 of the index-related 30 scrips ended with heavy losses. Only two in positive mode were Reliance Energy and Reliance Communication. The index on January 22 saw an erosion of more than 870 points.

The key-index touched the day's high of 18,274.15 and a low of 17,936.01 points in the volatile trading activity.

The second wide-based National Stock Exchange index Nifty also plunged by 161.35 points at 5,322.55, after touching a high of 5,470.40 and a low of 5,257.05 points.

IT stocks bore the brunt of today's sharp downfall. Marketmen said IT stock suffered on reports of contraction in US service industry as most of these companies earn more than 50 per cent of their revenues from American markets. The sector index lost 226 points at 3,813.82 followed by metal sector index which was down by 604.35 points at 16,189.46.

With US service industry now not in really good shape, many feel the world's largest economy may be in for even worse condition than previously feared.

Brokers said foreign funds were seen selling heavily in a number of blue-chip stocks.