Markets declined ahead of domestic retail inflation data due later on Monday, while an ongoing uncertainty and spill over from the Adani Group's market rout continued to be an overhang.
The Nifty 50 index closed 0.48% lower at 17,770.90, while the S&P BSE Sensex fell 0.41% to 60,431.84.
Investors await India's retail inflation data for January, due later in the day.
A Reuters poll of economists showed that India's annual retail inflation rose to 5.9% from a 12-month low in December, but stayed within the RBI's tolerance band of 2%-6% for the third consecutive month.
Wall Street equities closed lower on Friday, on fears of a longer-than-expected high-rate regime after hawkish comments from key Fed officials. The US inflation data is due on Tuesday.
Twelve of the 13 major sectoral indexes declined in domestic trading, with information technology stocks falling 1.88% amid worries of a growth slowdown in the United States, from where they get a significant share of their revenue.
Thirty-four of the Nifty 50 constituents declined with Adani Enterprises, Adani Ports, State Bank of India and Infosys among the top losers.
Titan Co TITN.NS was the top gainer, climbing over 2% after positive commentary from Goldman Sachs on the company's growth outlook and demand.
Uncertainty over the Adani conglomerate, which has lost more than $100 billion in market value, added to concerns in domestic markets.
"A lot of retail investors have got stuck in this selloff," said Avinash Gorakshakar, head - research at Profitmart Securities.
"If anything goes wrong in the cash flow of the Adani group companies, the whole debt repayment cycle will go for a toss."
India's market regulator will update the finance ministry this week on its investigation into the Adani Group's withdrawn $2.5 billion follow-on public issue, Reuters reported on Monday citing two sources.
"The shadow of the Adani saga is right now weighing on markets," said Atul Suri of Marathon Trends.