Indian shares fell more than 1 per cent on Monday to post their biggest daily decline in 2-1/2 weeks as European shares were hit hard by persistent concerns about the pace of global economic growth.
The falls came late in the session, and more than offset earlier gains when metal firms such as Tata Steel and lenders rallied after the country set minimum import prices for steel products.
The 30-share BSE index Sensex ended lower by 329.55 points or 1.34 per cent at 24.287.42 and the 50-share NSE index Nifty ended down by 101.85 points or 1.36 per cent at 7,387.25.
Among BSE sectoral indices, IT index plunged the most by 1.95 per cent, followed by TECk 1.6 per cent, oil & gas 1.48 per cent and FMCG 1.25 per cent. On the other hand, realty index was up 0.37 per cent and consumer durables 0.19 per cent.
Major Sensex losers were Tata Motors (-3.94%), ITC (-2.72%), ONGC (-2.43%), Sun Pharma (-2.42%) and TCS (-2.36%), while the top five Sensex gainers were Axis Bank (+2.38%), State Bank of India (+2.29%), Bharti Airtel (+1.27%), Lupin (+0.97%) and GAIL (+0.59%).
Metal firms such as Tata Steel and lenders rallied after the country set minimum import prices for steel products to help a heavily indebted sector struggling to compete against shipments from abroad.
India had set the floor price for imports on Friday, the first time it has taken such a step in over 15 years, to deter countries such as China from undercutting local mills.
The measures also lifted lenders such as State Bank of India given that steel companies owe large debts to the banking sector.
Midcap stocks such as Tata Elxsi and PC Jeweller were in focus as the NSE index added seven new names to the derivatives list.
Jet Airways gained as much as 8.5 per cent after the country's second largest carrier posted record earnings for the October-December quarter.
But the overall sentiment remained fragile, with investors saying global factors would likely impact local shares until the government unveils its 2016/17 budget on February 29.
"The news is marginally, more specifically sentimentally, positive for steel as well as bank stocks," said Vinod Nair, head of research at Geojit BNP Paribas Financial Services.
"We would adopt a wait-and-watch strategy as the focus now shifts to India's budget and we're not going with high expectations into it."
A report by SMC Global said: "Markets in Australia and Japan retraced some early losses Monday as most major Asian markets remain closed for the Lunar New Year holidays. US stocks declined broadly Friday, led by a rout in technology shares, capping a week that reflected investors' caution amid a murky picture of the US economy. Employment in the US rose by less than expected in the month of January, according to a report released by the Labour Department on Friday, although the unemployment rate still edged lower. The Labour Department said non-farm payroll employment climbed by 151,000 jobs in January compared to economist estimates for an increase of about 188,000 jobs."
Meanwhile, foreign portfolio investors (FPIs) sold shares worth Rs 606.83 crore on Friday, as per provisional data.
European equities fell sharply on Monday, extending the previous week's steep losses, with cyclical sectors losing ground on persistent concerns about the pace of global economic growth.
The pan-European FTSEurofirst 300 was down 1.7 per cent at 1,261.05 points by 0940 GMT after falling up to 1,259.27 poits, its lowest level since October 2014.