Indian shares dropped sharply to end over 2 percent lower on Tuesday after country's economic growth in the first quarter of the current fiscal slipped to an over six-year low of 5 percent as consumer demand weakened and government spending slowed. The previous low was recorded at 4.9 percent in April-June 2012-13.

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The fall was led by banking, metal and energy stocks. Major selling in index heavyweights like Reliance Industries Ltd, HDFC, ICICI Bank and HDFC Bank further dragged the indices. Meanwhile, the weak rupee also added to the losses. The rupee weakened to 72.03 against the dollar, versus its close of 71.41 on Friday.

The Sensex ended 770 points lower at 36,563, while the broader Nifty50 index lost 225 points to end the day at 10,798. In broader markets, the Nifty Midcap and the Nifty Smallcap index declined 1.8 percent each.

Meanwhile, stocks in Asia were also bruised as the United States began imposing 15 percent tariffs on a variety of Chinese goods on Sunday as Beijing initiated new duties on US crude.

Only Tech Mahindra and HCL Tech gained on the Nifty50, while all other stocks ended in the red. Tata Steel, UltraTech Cement, ICICI Bank, Titan and IOC were the top losers on the index.

All sectoral indices ended in red for the day. The Nifty PSU Bank index lost the most, down nearly 5 percent followed by the Nifty Metal, which fell 3 percent. Meanwhile, the Nifty Bank, the Nifty Private Bank and the Nifty Fin Services indices shed over 2 percent each. The Nifty Auto and Nifty Realty also lost 1.6 percent and 2.3 percent, respectively.

The Nifty PSU Bank index fell over 4 percent after the government announced a series of mergers involving 10 such banks to boost the struggling sector and revive economic growth. Indian Bank, Canara Bank, Punjab National Bank and Union Bank of India tumbled between 5.8-12 percent.

Auto stocks were beaten after top automakers reported a slump in August sales over the weekend. The Nifty Auto index fell as much as 1.6 percent, with Tata Motors dropping 4.7 percent and Eicher Motors declining 3 percent. Bajaj Auto, Hero MotoCorp, Maruti Suzuki and M&M also plunged during the day.