Markets ended marginally lower after trading in a narrow range, amid mixed global cues, with banks, software and capital goods shares leading the decline.
The 30-share Sensex ended down 104 points at 17,679 and the 50-share Nifty closed 36 points lower at 5,350.
The rupee dropped to a 1-week low in low volumes, with pair at 55.6075/6150 versus Friday's close of 55.4950/5050. It rose to as much as 55.63 in trade, the highest since Aug 20. End-of-month dollar buying from oil importers helping the cross, but foreign bank dealer say exporters seen selling at above 55.60.
In Asia, Japan's Nikkei share average inched higher on Monday, rebounding from the previous session's sharp loss, as risk appetite improved on expectations that the European Central Bank and the U.S. Federal Reserve will soon launch further stimulus.
But weakness in Chinese shares capped gains. The Nikkei ended up 0.2 per cent. The Shanghai Composite ended down 1.7 per cent, Hang Seng slipped 0.4 per cent while the Straits Times ended down 0.2 per cent.
The looming recession across the euro zone kept European shares and the single currency under pressure on Monday, but moves were capped ahead of a meeting of central bankers at the end of the week which could signal fresh stimulus measures. The CAC-40 and DAX were trading flat with poisitive bias.
Gold prices rose to all-time high of Rs 31,468 per 10 grams on Monday as speculators created huge positions, tracking a firming global trend.
Among the sectoral indices on the BSE, Realty, Bankex, Capital Goods, Metal, Power and IT were among the top losers which ended down between 1-2.4 per cent each.
Realty shares witnessed selling pressure after the Maharashtra Sales Tax Department issued a circular to real estate developers stating that value-added tax at the rate of 5 per cent of the value will be levied on flats, shops and bungalows sold by them between June 20, 2006 and March 31, 2010. esDLF ended down 6.6 per cent while Godrej Properties slumped 15 per cent.
Bank shares were down as hopes of a rate cut by the central bank faded as inflation continues to remain way above its comfort zone of 5 per cent. ICICI Bank ended down 2.1 per cent while SBI slipped 2.6 per cent and HDFC Bank ended 0.3 per cent lower.
Software majors were down on profit taking after gains last week. The BSE IT index ended up 3.3 per cent in the week ended August 24. Index heavyweight Infosys and Wipro ended over 1 per cent down each while TCS closed marginally lower.
Metal shares were down on concerns that demand would be lower on the back of weakening economic scenario in China after government data showed that profits of major industrial enterprises declined by 5.4 per cent in July. Jindal Steel was down 5.2 per cent, Hindalco slipped 0.8 per cent while Sterlite Industries ended nearly 2 per cent down.
Among other Sensex losers. Tata Motors ended down 2 per cent after the Supreme Court, on Friday, sought response of Tata Motors on a special leave petition filed by the West Bengal government challenging the quashing of the Singur Land Acquisition Act by the state high court.
Sensex gainers include index heavyweight Reliance Industries up 0.7 per cent at Rs 787 on short covering at lower levels after the stock ended 4 per cent lower last week.
Bharti Airtel ended up 0.4 per cent after the company said that it has finalised managers to manage the initial public offering of its telecom tower business, Bharti Infratel.
Mahindra and Mahindra gained 1.5 per cent after Bank of America-Merrill Lynch raises its target price for Mahindra & Mahindra to Rs 880 from Rs 825 and maintains the stock with a "buy" rating.
BoA-ML says it expects a 5 percent decline in tractor sales in fiscal 2012-13, but that will be "more than compensated" by growing auto sales in a note dated on Monday.
The BSE Mid-cap and Small-cap indices were down 1 per cent each. The overall breadth ended weak with 1,784 stocks declining and 1,022 advances.
