The S&P BSE Sensex and NSE Nifty 50 indices lost more than 1 per cent, weighed down by weakness in banking, metal and financial services shares. The Sensex ended at 41155, weaker by 458 points or 1.1 per cent and the NSE Nifty 50 ended at 12,119, down 129 points or 1 per cent.
Earlier in the day, the benchmarks opened lower tracking losses in other Asian peers as fears about the economic impact of China's spreading virus outbreak curbed risk appetite. Japan's Nikkei 225 fell nearly 2 per cent in early trade on Monday. Contracts on the S&P 500 Index fell more than 1 percent before paring losses and Japan's Topix slid. And Chinese futures fell more than 5 percent.
Analysts expect Indian markets to remain volatile until the announcement of the budget on Saturday, which may include government measures to revive economic growth that has slipped to a more than six-year low.
Crude prices extended declines on Monday, dropping below $60 for the first time in nearly three months as the death toll from China's coronavirus rose.
Banking and metal stocks witnessed profit-booking during the day. In the metal space, Tata Steel, Vedanta and Jindal Steel shed 4-5 per cent each. And in the banking space, SBI, HDFC Bank and Bank of Baroda shed 1-2 per cent each.
Pharma and cement stocks, however, bucked the weak trend. Dr Reddy's and Cipla gained 5 per cent and 1 per cent respectively. And Ultratech Cement gained 0.9 per cent.
The overall market breadth was negative as 1,058 shares advanced, while 1494 shares declined on the BSE.