The BSE Sensex fell for a third straight session on Monday to its lowest close in more than a week as continued concerns over the country's finances hit sectors particularly sensitive to growth such as banking, while earnings worries hit technology stocks.
Shares have been on the backfoot ever since the Reserve Bank of India left interest rates on hold on Thursday, with more selling spurred after the government's fiscal 2012/13 budget was unveiled on Friday.
The higher-than-expected borrowing plan announced is being seen as preventing the central bank from easing policy anytime soon, and is raising concerns about growth at a time of rising worries about corporate profits.
"The budget is seen as a disappointing one for the market. We have to wait and watch for any positive announcement from the government," said K. K. Mital, head of portfolio management at Globe Capital.
"Markets (Nifty) may come down to 5,150 levels in near term," he added.
The main 30-share BSE index fell 1.1 percent to 17,273.37 points, its lowest close since March 7. The 50-share Nifty index lost 1.1 percent to 5,257.05 points.
The falls made both indexes among the top decliners in Asia on Monday.
Banks fell for a third straight session, as investors see little relief for a sector facing a potential rise in bad assets and a continued liquidity shortage despite the RBI's cut in the cash reserve ratio earlier this month.
State Bank of India lost 3.2 percent, bringing losses over the past three sessions to 8.4 percent.
Smaller lender Union Bank of India fell more than 5 percent in intraday trade after Moody's downgraded the stock citing weaker financial metrics.
Real estate firms have also been hit hard, despite provisions in the budget allowing companies to borrow overseas for low-cost housing projects.
Housing Development and Infrastructure lost 7.5 percent on Monday, its fourth consecutive declining session, while Unitech lost 5.6 percent.
Technology shares were also among the day's biggest decliners, with analysts citing worries about softer-than-expected January-March earnings and uncertainty about IT budgets in the year ahead.
Tata Consultancy Services lost 4.1 percent.
Meanwhile, Reliance Industries fell 2.2 percent to mark its fourth losing session in a row as concerns about reduced gas output from its KG-D6 block in eastern India continued to weigh.