Reuters Market Eye - The BSE Sensex and the Nifty fall nearly 1.5 percent on caution ahead of the April-June current account deficit, which is expected to have widened from the previous quarter.
Shares also track lower global shares as a shutdown of the U.S. government seemed increasingly likely, while the euro had political troubles of its own as the Italian government teetered on the edge of collapse.
Banking stocks fall on worries about higher non-performing loans and the possibility of RBI raising rates one more time with its new found focus on inflation, dealers say.
ICICI Bank Ltd falls 3.9 percent, while State bank of India Ltd is down 1.2 percent.
Shares in steel companies fall on concerns that a lower-than-expected reading of China's PMI by HSBC may weigh on the short-term prospect, dealers say.
Tata Steel slumps 6.1 percent, Steel Authority of India falls 2.9 percent, while JSW Steel is down 0.9 percent.
More From This Section
The benchmark index has gained nearly 6 percent so far in September, heading for its first positive monthly close since May, while rising 1.7 percent for the September quarter as of Friday's close.
(Reporting by Abhishek Vishnoi)