Reports said Finance Minister Nirmala Sitharaman will soon meet Prime Minister Narendra Modi to finalise a second stimulus package for industry, the poor and farmers amid the COVID-19 lockdown.
The BSE S&P Sensex closed 536 points or 1.68 per cent lower at 31,327 while the Nifty 50 slid by 160 points or 1.71 per cent at 9,154.
Except for Nifty pharma which moved up by 1.3 per cent, all sectoral indices at the National Stock Exchange were in the red with Nifty realty down by 4.2 per cent, financial service by 3.8 per cent, PSU bank by 3.7 per cent, private bank by 3.4 per cent and IT by 2.3 per cent.
Among stocks, Bajaj Finance was the top loser after tumbling by 8.7 per cent to Rs 1,983.40 per share while Bajaj Finserve slipped by 6.7 per cent to Rs 4,410.
Private lenders IndusInd Bank slipped by 5.6 per cent, Axis Bank by 5.6 per cent, HDFC Bank by 4.5 per cent and ICICI Bank by 4.4 per cent.
However, index heavyweight Reliance Industries jumped by 4 per cent to Rs 1,425.80 per unit while FMCG major Britannia was up by 3.5 per cent. Sun Pharma, Cipla and Hero MotoCorp too traded with positive bias but with thin margins.
Meanwhile, Asian shares fell on doubts about progress in the development of drugs to treat COVID-19 and new evidence of US economic damage caused by the coronavirus pandemic.
While shares in China fell by 1.08 per cent, Japan's Nikkei slid by 0.86 per cent while shares in South Korea fell by 1.34 per cent.
( With inputs from ANI )