The BSE Sensex tumbled from its all-time high to end 147 points lower at 36,373.44 in choppy trade on Wednesday after a no-confidence motion against the government was moved in the Lok Sabha.
Speaker Sumitra Mahajan said she would announce the date for a debate on it in "2-3 days".
The Nifty too slipped below the psychologically important 11,000 mark.
The Sensex swung about 427 points on alternate bouts of buying and selling during the volatile session.
The BSE 30-share barometer, after hitting a new record of 36,747.87 points in early session, suddenly turned weaker in mid-afternoon trade after the no-confidence motion was tabled in the lower house.
It finally ended at 36,373.44, down 146.52 points, or 0.40 per cent, with metal, realty, telecom, auto, FMCG, power and banking stocks coming under selling pressure.
The gauge had gained 196.19 points in the previous session after a sharp drop in global crude oil prices.
The broader NSE Nifty slipped by 27.60 points, or 0.25 per cent to finish at 10,980.45. Intra-day, it shuttled between 11,076.20 and 10,956.30.
Brokers said apart from profit-booking at record levels by participants, political developments, fresh weakness in the rupee and unabated foreign fund outflows hurt trading sentiment.
Meanwhile, foreign portfolio investors (FPIs) sold shares worth a net of Rs 673.99 crore on Tuesday, while domestic institutional investors (DIIs) bought shares worth Rs 840.06 crore, data released by stock exchanges showed.