After posting its best monthly performance in 11 years last week, the domestic equity market came under pressure on Monday -- the first trading day of May -- amid a series of disappointing developments.

The benchmark S&P BSE Sensex plunged 1,806 points or over 5 per cent during the day with stocks such as HDFC Bank, HDFC, ICICI Bank, Infosys, and Axis Bank contributing the most to the index's fall. NSE's headline index, Nifty 50, dropped 508 points or over 5 per cent to 9,352.20 levels in intra-day deals.

Volatility index, India VIX, saw a sharp surge of 27 per cent to 43.18 levels, suggesting heightened volatility in the markets.

Here's a list of key factors that dragged the markets lower on Monday.

Fresh US-China trade tensions: Investor sentiment took a hit after the US President Donald Trump revived a threat of new tariffs against China in response to the Covid-19 pandemic. Trump, according to a Reuters report, said his administration was planning retaliatory measures against China as punishment for the Coronavirus outbreak. Trump has blamed China for what he says is “misinformation” when the virus emerged from the Chinese city of Wuhan and then quickly spread around the world.

Economic impact of lockdown 3.0: While the markets were expecting an extension in the lockdown, they now seem to be getting worried about the economic impact of the same. The government had extended the nationwide lockdown till May 17, albeit with partial relief measures.

"It is not a big surprise for the market since it was expecting phase-wise reopening of the economy, which is mostly in line with the latest protocol. But, more than that, the market has realised a concern, based on the latest economic and corporate data, that the cascading effect on the domestic economy and corporate earnings is much more than anticipated," said Vinod Nair, head of research at Geojit Financial Services.

Manufacturing PMI numbers: India's manufacturing activity contracted at its sharpest pace on record in April as a lockdown to combat the rapid spread of the coronavirus led to a slump in demand and massive supply chain disruptions, a private sector survey showed on Monday. The Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit, plunged to 27.4 last month from March's 51.8, by far its lowest since the survey began in March 2005 and its first time below the 50-mark separating growth from contraction in nearly three years. CLICK TO READ

Corporate results: Hindustan Unilever (HUL), the country’s largest consumer goods company, last week reported a 7 per cent decline in volumes for the quarter ended March 31, 2020 (Q4FY20), which was even worse than the demonetisation quarter (October-December 2016), when the fall was 4 per cent. The Street had factored in a drop of 2-4 per cent in Q4 volume growth on account of the Covid-19 outbreak and subsequent lockdown. A 7 per cent decline was a surprise,” said Kaustubh Pawaskar, associate vice-president (research) at brokerage Sharekhan.

IT major Tech Mahindra, too, posted a disappointing set of numbers for the March 2020 quarter. The Noida-based company missed the profit estimates for Q4FY20 on higher employee costs and a one-time impairment charge even as the company said it was expecting a recovery in demand in the medium-term.

Weak global cues: Asian stock markets fell sharply on Monday as risk sentiment turned sour after US officials tried to pin the blame for the coronavirus pandemic on China, stoking worries of fresh tensions between the world's top two economies.

US Secretary of State Mike Pompeo has that there was "a significant amount of evidence" that the new coronavirus emerged from a Chinese laboratory, doubling down on Washington's pressure on China over the virus' origin as US deaths and economic damage mount.

Singapore shares tumbled as much as 3.3 per cent, their sharpest intraday drop since March 30. Malaysian shares shed as much as 2.3 per cent, their worst in six weeks, ahead of March trade data. Meanwhile, the Thai stock market was closed for a national holiday.