Indian property and bank stocks fell swiftly on Tuesday after the central bank signalled its intent to raise interest rates soon and warned of asset bubbles and inflation.
India's real estate stock index fell almost 8 per cent to a two-month low while banking stocks fell more than 3 per cent, dragging the main index down 2 per cent.
Asian stocks also retreated following losses on Wall Street amid rising concerns the markets have gotten ahead of economic realities.
Emerging market and Japanese shares fell sharply after an overnight selloff on Wall Street, but the retreat failed to boost the U.S. dollar, which fell after the previous sessions' gains.
Gold rebounded from it weakest level in three weeks as the dollar took a break after a rally, spurring demand from bargain hunters.
Oil steadied at below $79 a barrel, pausing after three straight days of decline.