The Sensex was own 167 points and the Nifty was down 51 points in early trade. Among the losers in trade were Coal India, Dr Reddy's Labs, Bharti Airtel, Tata Steel, Jindal Steel and Siemens.
Coal India Ltd was the top loser in trade after reports that the government may next fiscal sell up to 10 per cent stake in the company.
Dr Reddy's Labs reacted to the death of the company's founder Dr Anji Reddy, who passed away last week.
India's largest telecom operator, Bharti Airtel fell after reports suggested that the company will soon be slapped with another show cause notice for sharing its 3G airwaves with Vodafone and Idea.
Private sector banks linked to the allegations of money laundering continued to see their shares being hammered down. Among the prominent losers from the space were Axis Bank, ICICI Bank and HDFC Bank.
Shares in defensive sectors continued to see buying interest, particularly those from the pharma and IT space. Notable gainers were Lupin, Hindustan Unilever and Sun Pharma.
Jindal Steel dropped despite reports that the company plans to commission its gas-based DRI or sponge iron plant having two million tonne capacity by July this year.
High beta stocks from the realty space lost heavy ground, including names like HDIL, Unitech, Indiabulls, DLF and Anant Raj.
PSU banking stocks also came in for some selling pressure with notable losers from the space being Punjab National Bank, Canara Bank, Bank of Baroda and State Bank of India.
Markets are likely to be volatile ahead of the RBI's Monetary Policy Review scheduled for March 19.