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The benchmark BSE Sensex fell nearly 1.5 per cent and the NSE index fell nearly 2 per cent to its lowest close in six months, dragged down by finance and auto stocks such as State Bank of India and Tata Motors.
The broader index closed 145 points or 1.8 per cent lower at 7,929.10, its lowest close since May 25, and marking its third straight session of falls.
The benchmark BSE index ended down 385.10 points or 1.47 per cent at 25,765.14, its sixth consecutive session of declines.
All BSE sectoral indices ended in the red. Among them, realty index plunged the most by 4.71 per cent, metal 3.34 per cent, PSU 3.25 per cent and auto 3.25 per cent.
Major Sensex losers were State Bank of India (-6.51%), Power Grid (-3.57%), Tata Steel (-3.52%), Maruti (-3.46%) and M&M (-3.16%), while the top five gainers were Wipro (+1.04%), TCS (+0.44%), Sun Pharma (+0.36%), Reliance (+0.34%) and ONGC (+0.15%).
Continued selling by foreign investors and uncertainty over the economic impact of the government's demonetisation move dragged the domestic sentiment.
Foreign investors, who have been net buyers of $5.43 billion of shares this year, offloaded $139.57 million on November 17, taking their selling for this month to $1.33 billion.
The government's move to withdraw higher-denomination banknotes is expected to pull down the gross domestic product growth from last year's 7.6 per cent by as much as 4.1 percentage points, while corporate operating profits are tipped to fall by as much as 40 per cent in the current quarter.
A report by SMC Global said: "Asian shares were on the defensive on Monday, undermined by fears that the strength in the US dollar and rising U.S. bond yields since Donald Trump's election to president could accelerate fund outflows from emerging markets. US stocks ended lower on Friday, with healthcare stocks leading the declines, as investors cashed in on a post-election rally and waited for clarity on the next administration's policies.Japan had a merchandise trade surplus of 496.174 billion yen in October, the Ministry of Finance said. That was shy of expectations for a surplus of 610.0 billion following the downwardly revised 497.6 billion yen deficit in September (originally 498.3 billion). Exports were down 10.3 percent on year, missing forecasts for a fall of 8.5 per cent following the 6.9 per cent decline in the previous month. Imports sank an annual 16.5 per cent versus expectations for a decline of 16.1 per cent after sliding 16.3 per cent a month earlier."
Asian shares were on the defensive on Monday, undermined by fears that the strength in the US dollar and rising US bond yields since Donald Trump’s election to president could accelerate fund outflows from emerging markets.
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