At 2:39 pm, the Sensex traded 331.92 points - or 0.87 per cent - lower at 37,846.03 while the Nifty was at 11,222.60, down 90.70 points - or 0.80 per cent - from its previous close.

Top percentage laggards on the 50-scrip index at the time were Yes Bank, IndusInd Bank, Tata Motors, ICICI Bank and GAIL, trading between 3.22 per cent and 6.24 per cent lower.

Market breadth favoured losses with an advance-decline ratio of about 1:2. On the BSE, 824 stocks traded higher in late afternoon, 1,506 moved lower and 168 were flat. On the NSE, 594 shares advanced, 1,154 declined while 379 remained unchanged.

HDFC Bank, ICICI Bank, Kotak Bank and Axis Bank were the top contributors to the fall in Sensex.

The Nifty Bank index - comprising shares of 12 major lenders in the country - fell as much as 3.12 per cent during the session. Yes Bank, ICICI Bank and State Bank of India (SBI) shares fell as much as 6.94 per cent, 2.66 per cent and 2.85 per cent respectively.

IndusInd Bank shares fell as much as 5.92 per cent to Rs 1,232.00 apiece on the BSE, after the lender reported a net profit of Rs 1,383.37 crore for the quarter ended September 30 as against Rs 920.25 crore for the corresponding period a year ago.

Analysts say the earnings reports by the IT majors along with the macroeconomic data will determine the investor sentiment in the near term.

Tata Consultancy Services (TCS) shares rose 0.91 per cent on the BSE, ahead of the release of the corporate earnings for the July-September period by the IT major. TCS will report its results after market hours on Thursday.

Official data on industrial production - gauged by the Index of Industrial Production (IIP) - for the month of August will be released on Friday.