At 1:35 pm, the Sensex traded 331.68 points - or 0.79 per cent - lower at 41,613.69 while the Nifty was down 93.45 points - or 0.76 per cent - at 12,258.90.
Thirty five stocks on the 50-scrip benchmark index moved lower at the time. Indian Oil, Zee Entertainment, TCS, Kotak Mahindra Bank and Reliance Industries, down between 2.44 per cent and 3.75 per cent, were the top percentage laggards in the Nifty.
On the other hand, Power Grid, Bharti Infratel, Bharti Airtel, Asian Paints and ICICI Bank - up between 1.24 per cent and 3.44 per cent - were the biggest Nifty gainers.
Reliance Industries, HDFC Bank and TCS together accounted for the lion's share of the fall in Sensex.
Equities in other Asian markets neared a 20-month top on Monday following record levels on Wall Street, with MSCI's broadest index of Asia-Pacific shares outside Japan up 0.1 per cent, after notching its highest close since June 2018, and Japan's Nikkei up 0.2 per cent near its highest in 15 months.
Crude oil prices rose in anticipation of tighter supply ahead. Brent crude futures - the global benchmark for crude oil - were last seen trading 76 cents higher at $65.61 per barrel. The rupee edged lower to 71.12 against the US dollar. India meets more than 80 per cent of its oil requirement through imports.
Shares in HDFC Bank fell as much as 1.49 per cent on Monday. On Saturday, the country's largest private lender by market value had posted a nearly 33 per cent jump in net profit to Rs 7,416 crore for the third quarter of current financial year, helped by growth in its loans portfolio.
Kotak Mahindra Bank, Zee Entertainment, Asian Paints, Axis Bank and ICICI Bank will report their earnings for the October-December period this week.
The S&P BSE Sensex and NSE Nifty benchmark indices had ended flat on Friday after a volatile session, in which the 30-scrip index registered a new all-time high of 42,063.93.
On that day, foreign institutional investors pumped in a net Rs 264.26 crore into Indian capital markets, but domestic institutional investors withdrew a net Rs 500.17 crore, according to provisional data from the NSE.
Domestic stock markets erased intraday gains on Monday with benchmark indices moving away from all-time highs registered earlier during the session. In afternoon deals, the S&P BSE Sensex fell as much as 350.54 points from the previous close to hit 41,594.83, and the broader NSE Nifty benchmark slid below the 12,250 mark, retreating from its all-time high of 12,430.50 registered in morning. Losses across most sectors led by banking, IT and energy stocks dragged the markets lower. Analysts awaited earnings announcements from large caps such as Kotak Mahindra Bank due later in the day.