The broader Nifty too nosedived over 137 points to end below the 11,400-mark.

Financials, led by HDFC twins HDFC Ltd and HDFC Bank, emerged as the biggest draggers of the session, pulling down the key indices from their key levels.

Subdued Asian and European markets due to escalating trade war between the US and China mainly led to a caution on domestic bourses.

The government Friday announced an array of steps, including removal of withholding tax on Masala bonds, relaxation for FPIs and curbs on non-essential imports to contain the widening CAD and check the rupee fall.

The Indian currency once again breached the 72-mark to hit a low of 72.69 (intra-day) against the US dollar.

"The news of possibility of further escalation of trade war between the US and China didn't go well with the markets. Also, weakness in rupee further dented the sentiment. Mostly sectoral indices traded in line with the benchmark index and closed lower. Markets are currently dancing to the global tunes and we do not see this changing any time soon..." an analyst commented.

The BSE 30-share barometer, after a lower start at 38,027.81, quickly cracked the 38,000-mark to hit a low of 37,548.93 on across-the-board selling in recent gainers and finally settled 505.13 points, or 1.33 per cent, down at 37,585.51.

The market capitalisation (m-cap) of BSE-listed companies dropped Monday by Rs over 1,14,676 crore.

The gauge had gained 677.51 points in the previous two sessions.

The NSE Nifty hit a low of 11,366.90 and finally ended 137.45 points, or 1.19 per cent, down at 11,377.75.

Meanwhile, on a net basis, foreign portfolio investors (FPIs) bought shares worth Rs 1,090.56 crore, while domestic institutional investors (DIIs) made purchases to the tune of Rs 115.14 crore on Friday, provisional data showed.

In the banking space, prominent losers were HDFC Bank 1.81 per cent, SBI 1.65 per cent, Axis Bank 1.60 per cent, Yes Bank 1.39 per cent, ICICI Bank 0.82 per cent and Kotak Bank 0.61 per cent.

Higher crude oil prices in global markets too weighed on the sentiments here.  International benchmark Brent rose 0.65 per cent to quote at USD 78.60 a barrel, while WTI crude was up 0.71 per cent at USD 69.48 a barrel.

Investor sentiment also hurt on reports that global financial services company Goldman Sachs said India's world-beating stock market run is over.

Among the Sensex pack, Sun Pharma was the biggest loser, tumbling by 2.85 per cent, followed by HDFC Ltd 2.47 per cent.

Other laggards included Tata Motors 2.35 per cent, RIL 2.12 per cent, Asian Paints 1.93 per cent, Hero MotoCorp 1.72 per cent, ITC 1.65 per cent, HUL 1.60 per cent, Infosys 1.18 per cent, Maruti Suzuki 1.15 per cent, NTPC 1.14 per cent, L&T 1.08 per cent, Bajaj Auto 0.94 per cent, Coal India 0.83 per cent, ONGC 0.67 per cent, Vedanta 0.36 per cent, M&M 0.35 per cent, Bharti Airtel 0.33 per cent and Wipro 0.30 per cent.

In contrast, PowerGrid stock was the top gainer in the Sensex kitty, surging 0.70 per cent, followed by TCS 0.40 per cent, Adani Ports 0.37 per cent and Tata Steel 0.05 per cent.

Among sectoral indices, the BSE finance index emerged the worst performer by declining 1.44 per cent, followed by energy 1.30 per cent, consumer durables 1.25 per cent, FMCG 1.20 per cent, bankex 1.08 per cent, healthcare 1.08 per cent, auto 1 per cent, capital goods 0.67 per cent, metal 0.29 per cent, PSU 0.25 per cent, oil & gas 0.21 per cent, teck 0.18 per cent and IT 0.13 per cent.

While, realty, power and infrastructure sector indices rose by up to 1.36 per cent.

A similar trend emerged in the broader markets, as the mid-cap index fell by 0.76 per cent, while small-cap index  fell 0.05 per cent.

Overseas, Asian stocks ended lower on renewed fears of escalating trade war between the world's two largest economies.

In the Asian region, Hong Kong's Hang Seng was down 1.28 per cent, while Shanghai Composite Index edged lower by 1.11 per cent. Financial markets in Japan were shut Monday on account of a public holiday.

In the Eurozone, Paris CAC 40 fell 0.26 per cent and Frankfurt's DAX was down  0.36 per cent in their late deals. London's FTSE too shed 0.30 per cent.