The Sensex and the Nifty ended marginally in the red due to weak global cues and as expectations of strong economic data due later in the day were outweighed by concerns that the monsoon could be deficient this year.
The 30-share BSE index Sensex ended lower by 109.29 points or 0.41 per cent at 26,283.09 and the 50-share NSE index Nifty ended down by 30.65 points or 0.38 per cent at 7,971.30.
Among BSE sectoral indices, healthcare index gained the most by 1.79 per cent, followed by metal 0.6 per cent, oil & gas 0.27 per cent and PSU 0.06 per cent. On the other hand, power index succumbed to heavy selling pressure and was down 1.54 per cent, followed by realty 1.34 per cent, infrastructure 1.31 per cent and capital goods 1.08 per cent.
Top five Sensex gainers were Lupin (3.55%), Cipla (+3.3%), Dr Reddy's (+3.15%), Coal India (+2.5%) and VEDL (+2.34%), while the major losers were BHEL (-3.45%), Bharti Airtel (-2.14%), Hindalco (-2.08%), ICICI Bank (-1.92%) and Reliance (-1.68%).
The country's gross domestic product (GDP) is expected to have grown 7.4 per cent in April-June, a Reuters poll showed, just below 7.5 per cent in January-March. The data is expected to show that India will remain the fastest growing major economy for a second straight quarter.
Investors are hopeful that upbeat data will give the central bank enough ammunition to cut interest rates at its next policy meeting on September 29.
However, investors and policy makers are also keeping a close eye on the progress of the monsoon as a strengthening El Nino weather pattern is likely to trim rainfalls in August-September, raising fears of the first drought in six years.
"I don't think this optimism will sustain at higher levels because global volatility is likely to shoot up," said Alex Mathews, head of research at Geojit BNP Paribas.
Hitesh Agrawal - Head Research, Reliance Securities, said in a report: "The recent bout of weakness in the Indian stock market has largely come about on account of global factors. Thus, in the near-term, investor focus will remain on news emanating from China and from the US, especially from the Fed, as market participants have started to bake in the probability of the rate hike getting pushed to December in the wake of recent global developments. On the domestic front, auto monthly sales numbers would be released next week, which will keep the sector in focus. Investors are also expected to react to the 2Q GDP growth numbers. Further, from an investment point of view, in such volatile times, the most prudent strategy is to stick with quality companies, as they are relatively better placed to weather economic challenges."
Global markets
European shares fell on Monday, with Germany’s DAX and France’s CAC on track for their worst month in four years, hit by sliding Chinese stocks and prospects of a near-term US rate increase.
At 0805 GMT, the DAX, the CAC and the euro zone’s Euro STOXX 50 were down about 1 per cent. Volumes were likely to be thin, with British markets closed for a public holiday.
Asian stocks sagged on Monday after top Federal Reserve officials kept the door open for an interest rate hike in September and investors braced for China economic data this week.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.5 per cent. The index, which hit a three-year low last week, was on track for a 10 per cent loss this month.