Bombay Stock Exchange benchmark index Sensex declined as much as 499.22 points to touch an intraday low of 35,714.16 in morning trade, while the Nifty hit 10,729.30, down 150.8 points from the previous close.
Selling in banking, auto and metal stocks dragged the markets lower amid a broad-based weakness. Analysts awaited key macroeconomic data due later this week.
At 11:24 am, the S&P BSE Sensex traded 247 points lower at 35,966 and the Nifty was at 10,810, down 70 points from the previous close.
At that time, top laggards on the Nifty were Vedanta, Hindalco, Yes Bank, JSW Steel, trading between 3.27 per cent and 3.88 per cent lower.
Analysts attributed the sudden plunge in the markets to geopolitical concerns.
India carried out pre-dawn strikes on a terror camp across the Line of Control, according to reports. The strike was carried out at around 3:30 this morning by 12 Mirage 2000 fighter jets.
The aircraft dropped 1,000 kg laser-guided bombs on a major terror camp across the Line of Control, completely destroying it, news agency ANI reported, quoting Air Force sources.
“Geopolitical tensions have affected the markets… More downside can be expected. We need to see how things pan out at the border,” AK Prabhakar, head of research at IDBI Capital Markets.
The rupee declined by as much as 33 paise against the dollar, to touch 71.30 on the downside in early trade. The 10-year benchmark bond yield rose to 7.61 per cent compared with 7.58 per cent on Monday.
"People don't want to run position during such uncertain times," news agency Reuters quoted a dealer at a foreign bank as saying. "Had this strike not been there, bond yields would have been lower as crude is down."
Equities in other Asian markets lost steam after scaling a five-month high as investors waited to see if Washington and Beijing can clinch a trade deal. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 per cent from its highest since mid-September as US and Chinese negotiators work to hammer out a deal that would end a protracted tit-for-tat tariff battle.
The government is due to release GDP or gross domestic product data on Thursday. According to a median forecast from more than 55 economists polled by Reuters on February 19-25, country's GDP growth stood at 6.9 per cent in the October-December quarter - its slowest pace in over a year.