Indian shares slumped further on Monday after the government ended a tax break on certain equity investments and amidst weak global cues.
Finance Minister Arun Jaitley in his budget speech last week announced that the profits exceeding Rs 100,000 from shares held for more than a year will be taxed at 10 percent.
The budget also raised spending concerns after the fiscal deficit target was revised to 3.5 percent for 2018-19 as against the earlier target of 3 percent.
Investors are now keeping an eye on the Reserve Bank of India's interest rate decision on February 7.
The S&P BSE Sensex declined 0.88 percent to 34,757 while the broader NSE Nifty dropped 0.87 percent to 10,666.
Among the top Sensex laggards, HDFC fell 3.9 percent, Larsen and Toubro declined 3.5 percent, IndusInd Bank lost 2.5 percent while Adani Ports was down 2.1 percent.
Union Bank of India shares fell 0.9 percent after the lender swung to loss in the quarter ended December 31.
But Tata Motors gained 3.7 percent ahead of its December quarter earnings due later in the day. The automaker is set to post a net profit of Rs2,349.10 crore on revenues of Rs73,400.50 crore, according to Bloomberg estimates.
Market breadth was in the favour of gainers, with about 2 stocks advancing to every 1 stock that declined.
Meanwhile, Asian shares fell the most in over a year following a sell off on Wall Street amidst speculation that central banks globally are likley to tighten policy more aggressively.
MSCI's broadest index of Asia-Pacific shares outside Japan shed 1.7 percent in the largest daily drop since late 2016, Reuters data showed.
Investors were spooked by Friday's U.S. payrolls report which showed wages growing at their fastest pace in more than 8-1/2 years and fuelling inflation expectations, Reuters reported.