In volatile trading, the Bombay Stock Exchange benchmark Sensex on Wednesday tumbled nearly 232 points on reports of a probe into a lending scam involving some financial houses, including LIC Housing.
The Central Bureau of Investigation (CBI) arrested eight people, including Chief Executive Officer of LIC Housing Finance for allegedly passing corporate loans for monetary considerations.
The benchmark surrendered significant ground in the last 30-minutes of trade and ended 231.99 points lower at 19,459.85, after touching the day's high of 19,835.57 and a low of 19,375.92.
In the 30-BSE index components, 25 stocks closed lower while five ended higher.
Similarly, the broad-based National Stock Exchange index Nifty also lost 69 points to 5,865.75. It shuttled between 5,976.65 and 5,833.60.
The market, already under pressure on European debt crisis and North Korea attack on South Korea, had another round of selling on news of a probe on leading banks led by LIC Housing for fake lending came in.
Brokers and speculators were seen squaring up their pending positions ahead of November month contract expiry in the Derivatives segment.
The trading sentiment was also influenced by the MSCI Asia Pacific Index - which fell 3.5 per cent from a two-year high set on November 8, amid speculation that China will intensify efforts to tame inflation and on concern Ireland's debt crisis will spread in Europe.
The banking sector index suffered the most - falling 2.94 per cent to 13,477.92, following reports of a probe in LIC Housing Finance on fake lending to some developers.
LIC Housing stocks tumbled Rs 239.60 to Rs 1,068.55, State Bank of India Rs 98.50 to Rs 2,854.10, HDFC Bank Rs 63.25 to RS 2,307.10 and Canara Bank Rs 55.90 to Rs 717.
The realty sector was second-worst performer - losing 2.88 per cent to 3,041,.62 as stocks of DLF, HDIL, Indiabulls Real estate and D B Realty fell sharply.
As the selling pressure spread over a wide front, midcap index fell 1.11 per cent to 8,004.48 and smallcap index 0.56 per cent to 10,153.17.