The S&P BSE Sensex slumped as much as 907.91 points to touch intraday low of 38,605.48 and the NSE Nifty 50 Index dropped 287.85 points to hit intraday low of 11,523.30.

The Sensex fell 793 points or 2.01 per cent to close at 38,720.57 and the NSE Nifty 50 Index tumbled 2.14 per cent or 252.55 points to shut shop at 11,558.60. On closing basis, Sensex and Nifty posted their worst single-day declines in over nine months.

"Higher tax incidence proposed in the Budget for foreign portfolio investors and high net worth individuals is spooking the markets," AK Prabhakar, head of research at IDBI Capital, told NDTV in a telephonic conversation. "The proposal to increase minimum public shareholding for all listed companies in Budget is also impacting the markets negatively," he added.

Experts also said the new tax implications on listed companies are not in favour of investors. "The government has also proposed a 20 per cent tax on buy back of shares by the listed companies. The tax was earlier restricted to unlisted companies and with the introduction to tax share buy back, investors felt that the tax changes are not investor friendly," Naveen Wadhwa of Taxmann told NDTV.

All the 11 sector gauges compiled by National Stock Exchange ended lower led by the Nifty PSU Bank Index's 5.9 per cent decline. Auto, Realty, Bank, Financial Services, Media, Metal and Private Bank sector gauges also dropped between 2.5 and 3.5 per cent each.

The selloff in today's session was broad-based as the Nifty Midcap 100 Index dropped 2.70 per cent and the Nifty Smallcap 100 Index plunged 2.4 per cent. India VIX, gauge of volatility in the equity markets spiked 7.3 per cent to 14.02.

In the Nifty 50 basket of shares, 45 shares closed lower while on the Sensex 27 out of 30 shares ended with losses.

Bajaj Finserv was top Nifty loser, the stock tumbled 10.12 per cent to close at Rs 7,851. Bajaj Finance, ONGC, NTPC, Hero MotoCorp, Indian Oil, Indiabulls Housing Finance,, Larsen & Toubro, Grasim Industries and State Bank of India also fell between 4 and 8 per cent each.

Maruti Suzuki India shares fell nearly 6 per cent in intraday trade on Monday, extending its fall to a second straight day after the carmaker reported a reduction in production. On the Bombay Stock Exchange (BSE), the Marurti Suzuki India share price opened lower at Rs. 6,287.00, as against its previous close of Rs. 6,364.75, and declined to a record a fresh 52-week low of Rs. 5,985.55 in afternoon deals. That marked the first time since March 31, 2017 that the Maruti Suzuki India stock traded below the Rs. 6,000 apiece mark.