At 9:44 am, the Sensex traded 403.18 points - or 1.08 per cent - lower at 36,929.61, while the Nifty was down 120.45 points - or 1.09 per cent - at 10,902.8.

Top percentage laggards on the 50-scrip index at the time were Indian Oil, Tata Motors, Bharat Petroleum, UltraTech Cement, Indiabulls Housing Finance and ICICI Bank, trading between 2.65 per cent and 3.80 per cent lower.

HDFC, ICICI Bank, HDFC Bank and Reliance Industries were the top drags on the Sensex.

Official data released on Friday showed that India's GDP or gross domestic product expanded 5 per cent in the quarter ended June 30, marking the slowest pace since March 2013. The GDP data highlighted concerns about a downturn in the economy amid production cuts and lakhs of estimated job cuts in the auto sector.

The Nifty Bank - comprising 12 large banking stocks - fell as much as 1.89 per cent during the session, with Punjab National Bank shares the worst hit. Also on Friday, the government announced a mega merger of banks that would more than halve the number of state-run lenders in the system to 12. The government also said that PNB would become the second-largest PSU bank in the country, after State Bank of India.

“There is a knee-jerk reaction in banks. Any mergers will take time… previous mergers have taken years for their benefits to come. These are long-term positives and short-term negatives,” AK Prabhakar, head of research at IDBI Capital, told NDTV.

Separate data on Monday showed growth in core sectors - such as coal, fuel and power - stood at 2.1 per cent in July, as against 7.3 per cent in the corresponding period a year ago. Measured by the Index of Eight Core Industries, core sector activity has a weightage of about 40 per cent in the Index of Industrial Production (IIP), which gauges factory production.

Equities in other Asian markets faced headwinds on Monday with MSCI's broadest index of Asia-Pacific shares outside Japan shedding 0.3 per cent but Japan's Nikkei rising 0.1 per cent. The US began imposing 15 per cent tariffs on a variety of Chinese goods on Sunday and China began imposing new duties on US crude oil, the latest escalation in their trade war.

China said on Monday it lodged a complaint against the US at the World Trade Organization over its import duties, trashing the latest tariff actions as violating the consensus reached by leaders of China and the US in a meeting in Osaka.