Benchmark share indices ended at their lowest level in over two weeks as investors booked profits ahead of the two-day US Fed meet which could provide cues of an interest rate hike in the US.
Further, selling by foreign funds in the previous session also weighed on market sentiment.
The 30-share Sensex ended down 324 points at 26,493 and the 50-share Nifty closed 109 points lower at 7,933.
Foreign funds sold index futures worth Rs 1,394 crore and Rs 74.59 crore in the cash segment on Monday, as per provisional exchange data.
However, the broader markets witnessed a sell-off after recent gains underperforming the benchmark indices. The BSE Mid-cap and Small-cap indices ended down over 3% each.
In the month to September 15, the small-cap and mid-cap index had gained 10% and 8%, respectively.
The Rupee was trading higher at 61.07 against the US dollar compared to Monday's close of 61.13 tracking Asian currencies which are trading mostly stronger versus the dollar.
Asian markets ended weak with Japanese shares ending their five-day winning streak on caution ahead of the US Federal Reserve policy meet later today.
The Nikkei ended down 0.2% at 15,911.53.
Shanghai Composite was the top loser in the region which ended down 1.9% as weak economic data continued to weigh on market sentiment. Hang Seng dropped 0.9% and Straits Times ended 1.2% lower.
European markets were trading lower ahead of the US Fed meet and political cues from Scotland. CAC-40, DAX and FTSE-100 were down 0.3-0.4%.
All other sectoral indices ended in the red. BSE Realty index was the top loser down 3.2% followed by Power, Capital Goods, Consumer Durables, Oil and Gas indices among others.
Index heavyweight Reliance Industries was the top loser down 2.3% on profit taking.
ONGC and Coal India ended down 2-3% each after the government announcement stake sale in both the state-owned
Tata Motors was down nearly 3% after global wholesales in August 2014, including Jaguar Land Rover, stood at 73,524 units showing a declination of 10% from the corresponding month last year.
L&T ended down 2.8% tracking weak industrial growth in July.
SBI, Axis Bank, HDFC Bank, ICICI Bank and HDFC ended down 1-3% each after RBI Governor said that although the WPI has shrunk to a five-year low in August but there is no point in lowering interest rates to have inflation picking up again.
However, FMCG majors ITC and HUL along with Infosys were among the Sensex gainers.
Among other shares, Multi Commodity Exchange ended down 0.9%.
The Competition Commission of India (CCI) has cleared Kotak Mahindra Bank's proposed Rs 459 crore deal to acquire 15% stake in commodity bourse.
Venus Remedies tanked 20% on back of heavy volumes on profit bookings.
Mastek has surged nearly 13% after the company on Monday announced the demerger of its insurance products and services business into a new company called Majesco.
Credit Analysis and Research (CARE) ended higher by 4.8% after the company said its board has declared a special dividend of Rs 65 per equity share of Rs 10 each for the financial year 2014-15.
Cox and Kings ended 2% higher, extending its previous day’s 5% rally, on reports that the leisure travel arranger is planning to raise about Rs 300-350 crore via qualified institutional placements.
Future Retail gained 2% after Morgan Stanley Asia (Singapore) PTE acquired over 26 lakh shares through a bulk deal on the National Stock Exchange.
Persistent Systems gained nearly 3% after the company late Monday said it will acquire stake in Pune-based Altizon.
Market breadth was weak with 2,232 losers and 801 gainers on the BSE.
