However, losses were capped as India's annual rate of inflation based on wholesale prices eased to 3.80 per cent in December.
Index-wise, the NSE Nifty50 declined by 57.35 points or 0.53 per cent to settle at 10,737.60.
The S&P BSE Sensex closed at 35,853.56 points, lower by 156.28 points or 0.43 per cent from the previous close of 36,009.84.
It had opened at 36,113.27 points and touched an intra-day high of 36,124.94 and a low of 35,691.75.
"Early hiccups to Q3 results due to mixed outcome from IT and bank blue-chips negatively influenced the domestic market," said Vinod Nair, Head of Research, Geojit Financial Services.
"Additionally, a sharp fall in the IIP and headwinds from global market due to slowdown in world economy, US shut-down and Brexit impacted the sentiment. Consolidation in domestic market was broad-based as FIIs were on a selling mode while DIIs were on the sideline due to concerns over oil prices, weak INR and the fiscal deficit."
On the global front, negative Asian markets on the back of poor Chinese trade data and an extended partial US government shutdown fuelled concerns of a slowdown of global growth.
Domestically, disappointing macro-economic growth data, coupled with concerns over the third quarter earnings eroded investors' risk-taking appetite.
"Data showing a sharp drop in IIP in November 2018 dented investor sentiment. However, stocks did stage a mild recovery in the early afternoon trade on news that the monthly WPI, stood at 3.80 per cent for the month of December 2018 (over December 2017)," said Abhijeet Dey, Senior Fund Manager-Equities, BNP Paribas Mutual Fund
On Monday, the Indian rupee lost 30 piase to settle at 70.79 per US dollar against the previous close of 70.49.
Sector-wise, except for the export-oriented IT counter on the BSE, which gained as the rupee weakened, all other sectoral stocks witnessed heavy selling pressure.
In terms of investments, FIIs sold shares worth Rs 732.46 crore, whereas DIIs bought stocks worth Rs 527.49 crore on Monday.
"Technically, with the Nifty correcting further, traders will need to watch if the index can now hold above the immediate supports of 10,692; else a further correction is
likely," said Deepak Jasani of HDFC Securities.
Stock-wise, Yes Bank was the top gainer on Sensex, jumping close to 6 per cent followed by Infosys, Sun Pharma, Bajaj Finance and Maruti Suzuki that inched up in the range of 1 to 3 per cent.
In contrast, Larsen and Tubro and IndusInd Bank lost over 2 per cent while Vedanta, Power Grid and NTPC lost in the range of 1 to 2 per cent.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)