Benchmark indices fell sharply in trade after worries that the US Fed was set to hike interest rates earlier than expected.
On Friday Boston President Eric Rosengren, said that "gradual tightening is likely to be appropriate".
The Sensex was trading with losses of 500 points, while the Nifty dropped 160 points in early trade.
The biggest losses were seen in the shares of Tata Motors, which as down near 4 per cent.
The stock has seen a superb rally in the last few weeks. Banking stocks were also weak in trade with Axis Bank, ICICI Bank, Bank of Baroda and State Bank of India seeing deep cuts. Yes Bank, which had fallen sharply, following the cancellation of its QIP on Friday, lost another 5 per cent in trade and was the biggest Nifty loser.
Tata Steel was down 2.5 per cent, ahead of its results to be declared later today. The shares were last trading at Rs 384. HDIL too was seeing cuts ahead of results.
Meanwhile, the rupee opened at 66.88 to the US dollar, as against 66.68 on Friday.