After a day's breather, benchmark indices Sensex and Nifty on Monday resumed their weakening trend to settle around the levels seen two months ago, mainly due to heavy selling in auto stocks.
Besides, weak Asian stocks coupled with sustained outflow of foreign funds weighed on investors' sentiment.
The 30-share Sensex ended 196.82 points, or 0.52 per cent, lower at 37,688.28, while the broader NSE Nifty fell 95.10 points, or 0.84 per cent, to settle at 11,189.20.
The auto sector that was grappling with tepid sales numbers and growth concerns has to face a new challenge in the wake of the government's announcement of new policy measures, including lower taxes, to push electric vehicles.
One more hurdle came in the way of this traditional sector in form of government's proposal to hike registration fees for old and new vehicles, leading to heavy sell-offs in auto stocks.
Sectorally, BSE auto tumbled 3.55 per cent, metal dropped 3 per cent, telecom slipped 2.85 per cent -- top three laggards.
On the contrary, BSE IT, bank and teck ended in the positive terrain.
The market breadth was tilted in favour of sellers on the BSE as 1,706 stocks declined and 766 advanced.
Among the Sensex constituents, Tata Motors was the biggest loser with 6.52 per cent fall, followed by Vedanta 5.09 per cent, Bajaj Auto 4.99 per cent, Maruti Suzuki 4.26 per cent and Tata Steel 2.65 per cent. Of the 30 stocks of Sensex, 23 ended in the red and only 7 closed in the green.
Among the gainers were ICICI bank, HCL Tech, IndusInd Bank, TCS, Infosys, SBI and Bharti Airtel -- gaining as much as 3.32 per cent.
"Markets are largely focusing on weak domestic sentiment while cues are mixed from the global front. And, in the absence of any major event, we feel earnings will continue to dictate the market trend," an analyst commented.
Meanwhile, the Indian rupee appreciated by 14 paise to close at 68.75 against the US dollar.
The global crude benchmark, Brent Oil, was trading 0.11 per cent lower at USD 63.30 a barrel.
Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 1,503.26 crore on Friday, as per provisional data.
Asian stocks slipped ahead of the resumption of US-China talks and amid expectations that the US Federal Reserve will cut rates for the first time in more than a decade.
Shares in mainland China were mixed on the day, the Shanghai composite fell, while Hong Kong's Hang Seng index dropped.
In South Korea, Kospi dropped, while Japan's Nikkei declined.
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