Reports that the US might impose fresh tariffs on China weighed down the global market sentiments.
Further, weakening of the rupee during the day, despite the government announcing measures to arrest the fall of rupee in the weekend, dampened domestic sentiments.
Index-wise, the Nifty50 of the National Stock Exchange (NSE) closed at 11,377.75 points, lower by 137.45 points or 1.19 per cent from its previous close of 11,515.20 points.
The barometer S&P BSE Sensex, which had opened at 38,027.81 points, closed at 37,585.51 points, lower by 505.13 points or 1.33 per cent from its previous close of 38,090.64 points.
It touched an intra-day high of 38,027.81 points and a low of 37,548.93 points.
In the broader markets, the S&P BSE Mid-cap declined by 0.76 per cent and the S&P BSE Small-cap ended 0.05 per cent lower from its previous close.
The BSE market breadth was bearish with 1,441 declines against 1,282 advances. The total number of stocks traded on the exchange was 2,914, with 191 ending unchanged.
The weakness came on the back of weak global cues amid reports US could soon announce a new round of tariffs on Chinese imports, said Deepak Jasani, Head of Retail Research, HDFC Securities.
Major Asian markets closed on a negative note and European indices like FTSE 100, DAX and CAC 40 traded in the red, he said.
On the currency front, the Indian rupee slipped below the 72-mark again, to close at 72.51, weakening 66 paise from its previous close of 71.85 per greenback on Friday.
Investment-wise, provisional data with the exchanges showed that foreign institutional investors sold scrip worth Rs 106.54 crore and domestic institutional investors sold stocks worth Rs 180.36 crore.
Sector-wise, only three indices on the BSE ended in the green, with marginal gains. The S&P BSE realty index gained 28.03 points, the power index rose 2.86 points and the utilities index gained just 0.81 points.
On the other hand, the S&P BSE banking index lost 330.74 points, the consumer durables index was down 259.43 points and the auto index ended 243.10 points lower from its previous close.
The top gainers on the Sensex were Power Grid, up 0.70 per cent at Rs 201.50; Tata Consultancy Services, up 0.40 per cent at Rs 2,071.60; Adani Ports, up 0.37 per cent at Rs 381.45; IndusInd Bank, up 0.07 per cent at Rs 1,875; and Tata Steel, up 0.05 per cent at Rs 615.65 per share.
The losers were Sun Pharma, down 2.85 per cent at Rs 646.15; HDFC, down 2.47 per cent at Rs 1,878.60; Tata Motors, down 2.35 at Rs 260.20; Tata Motors(DVR), down 2.15 per cent at Rs 141.00; Relaince Industries, down 2.12 per cent at Rs 1,226.25 per share.