The latest selloff in global markets was triggered by Friday's US jobs data which showed wages growing at their fastest pace in more than eight-and-a-half years and fuelling inflation expectations. This has led to expectations that the Federal Reserve - the US central bank - could raise interest rate faster than expected.

US bond yields or interest rate have also risen sharply in anticipation of tighter Fed policy, which is seen negative for emerging markets like India and commodity prices.

On Friday, the Dow fell 2.54 per cent, the S&P 500 2.12 per cent and the Nasdaq 1.96 per cent. It was the Dow's biggest daily percentage loss in 20 months and the largest point fall since December 2008.

Finance Minister Arun Jaitley on Monday attributed the downslide in the bourses to the negative global cues. "It is not due to the Budget or the LTCG. Dow Jones has also fallen by over 2 per cent," the finance minister said, referring to the Friday's selloff on Wall Street.

Back in the domestic markets, the market selloff was broad-based. BSE sectoral indices of banking, metal, infra, services and capital goods came under strong selling pressure.

Among the top losers on Nifty50, HDFC, L&T, IndusInd Bank, Adani Ports, Kotak Mahindra Bank, ONGC and Indiabulls Housing Finance closed down around 2-4 per cent.

Asian markets on Monday fell the most in over a year with MSCI's broadest index of Asia-Pacific shares outside Japan shed 1.9 per cent in the largest daily drop since late 2016. Japan's Nikkei sank 2.3 per cent, while Australia's main index lost 1.3 per cent and Chinese blue chips slid 0.7 per cent.

The next trigger for markets is the Reserve Bank of India's (RBI) policy review on February 7 amid worries it could turn more hawkish on inflation after inflation hit a 17-month high in December, well above its 4 per cent target.

"We expect the RBI to remain on a pause in this policy. However, the tone will likely be more hawkish with probability of rate hikes in FY2019 increasing," said Suvodeep Rakshit, senior economist at Kotak Institutional Equities.