The 30-share Sensex ended down 362 points or 1.8 % at 19,900 and the 50-share Nifty ended down 122 points or 2% at 5,890.
In the broader markets, the midcap index slipped 1.35 and the smallcap index gave off 0.6%, both outperforming the BSE benchmark index which was down 1.8%.
Rupee
The Rupee remained weak through the day due to month-end dollar demand from importers.
At 1600 hours, the rupee was trading at Rs 62.63 compared with Friday's close of Rs 62.28 per dollar.
Global Markets
Most Asian markets slipped as a soft lead from Wall Street and renewed concerns about the Federal Reserve's policy stance took the shine off an upbeat survey on China's manufacturing sector.
MSCI's broadest index of Asia-Pacific shares outside Japan, up early in the day, was off 0.1%.
However, select markets had significant gains, thanks to a survey that showed a promising pick-up in Chinese export orders, another sign of stabilisation in the world's second biggest economy.
Shares in Shanghai gained 1.3% and Taiwan's main index was up 1%. Japanese markets were closed for a holiday.
European shares carved out minor gains as fresh concerns about the Federal Reserve's policy stance took the shine off an election triumph for Angela Merkel and some upbeat euro zone data.
Merkel's resounding win in Sunday's German elections, seen as a strong vote of support for her efforts in keeping the euro together, was followed by forward-looking euro zone PMI data showing the bloc's economy continuing to pick up pace.
Markit's September Flash Composite Purchasing Managers' Index jumped to 52.1 from last month's 51.5, its highest since June 2011 and beating expectations for 51.9.
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