The Mumbai stock exchange's 30-share Sensex index fell 112.85 points or 1.45 percent to close at 7,685.64. The Sensex has lost 1,135.85 points since October 5 when it reached an all-time trading high of 8,821.84.
Turnover was low at 25.73 billion rupees (571 million dollars) as 1,888 stocks declined and 528 gained.
"The outflows continue to dampen sentiment. The outlook for global equities is also poor and with liquidity now drying up, there is no buying support even at lower levels," said Atul Hatwar with brokerage Crosseas Securities.
A rare gainer was Bharti Tele, which closed 5.5 percent up after world leader Vodafone Group Plc announced it was picking up a 10 percent stake in Bharti Televentures Ltd for 1.5 billion dollars.
Bharti Enterprises will continue to have management control with a 45.9 per cent in the company through its subsidiary, Bharti Telecom Ltd.
Overseas funds were net sellers in October, offloading stock worth 7.9 million dollars but remain net buyers for the calendar year with investments totalling 7.8 billion dollars.
Tata Consultancy Services (TCS) closed 44.1 rupees lower or 3.1 percent down at 1,362.3 rupees. Bajaj Auto also fell on selling pressure, closing 72.7 rupees down or 4.2 percent at 1,659.9 rupees.