After an initial 100 points rally, key market index Sensex shed all its gains to trade around 0.5 percent down ahead of Thursday expiry of November future and options contracts.
Worries over demonetisation impacting growth figures and possible pulling out of money by foreign institutional investors (FIIs) from emerging markets like India also weighed on sentiments.
At 10:19 am, while Sensex was trading 0.52 percent down at 26,014.92, 50 share index Nifty was at 8,021.60, down 0.64 percent.
IndusInd Bank was leading the losing pack with a loss of 3.6 percent to trade at Rs 1,061.90 in the early morning trade. Other major losers were Eicher Motors, Bank of Baroda, Power Grid Corporation and Ambuja Cements, among others.
However, shares of Bharti Airtel, HCL Tech, Idea Cellular, Hindalco and Wipro bucked the trend and were trading in the green.
Among sectors, auto, banking, consumer durables and FMCG were dragging the market on Monday. IT and tech sectors were providing some support to the index.
Meantime, both small cap and mid cap indices were trading in the red as demonetisation impacted cash-based transactions in the economy.
Overall market width turned negative on Monday morning trade with 1,439 declines and 589 advances.
According to market analysts, probable interest rate hike by US Federal Reserve in December has impacted investors' sentiments as participants expect fund outflow by FIIs going ahead.
Similarly, slashing of India's GDP growth rate to 5.8 percent by Ambit Capital on the back of demonetisation move of the government also dragged market indices.
In the early morning trade, rupee was up 0.11 percent against dollar to trade at 68.21.