There was panic selling across the board as local operators and fund managers sold heavily following two car bombs which killed at least 44 and injured over 100.
The Mumbai Stock Exchange's 30-share index fell 120.49 points to close at 4,004.63.
All major refinery, oil and gas, steel and banking stocks lost ground during trading on Monday afternoon.
Many crucial trades from retail investors could not be put in or confirmed with brokers during afternoon trading as there were disruptions to cellular and fixed-line telephones following the blasts.
Despite panic and tensions in Mumbai, BSE officials said the markets would open for trading as normal on Tuesday.
"There was panic selling as marketmen were concerned with security at the financial centre"
Brokerage dealer, Mumbai
"There was panic selling as marketmen were concerned with security at the financial centre, particularly trading at the 26-storey BSE building in South Mumbai," said a dealer with a BSE institutional brokerage.
A technical analyst with BSE brokerage SSKI Securities said, "It is too early to say where the markets could head after the blasts."
Besides Bangkok, other markets in the region were unaffected by the Mumbai explosions which happened after most of them had already closed.
The Tokyo Stock Exchange's benchmark Nikkei-225 index inched 4.53 points or 0.04% lower to close at 10,276.64. The broader Topix index of all first-section issues slipped 0.64% or 6.40 points to 997.80.
Volume totalled an estimated 1.23 billion shares, down from 1.48 billion shares on Friday, and declining shares outnumbered gainers 740 to 630.