The 30-share BSE Sensex closed at a three-week low of 37,922.17, down 467.65 points or 1.22 per cent.
Following slide in stocks, the market valuation of BSE- listed companies plunged Rs 1.96,130.84 trillion to Rs 1.55,43,657 trillion at close of trade Monday.
The Indian rupee has depreciated 13 per cent so far in 2018 and touched a historic low of Rs 72.67 to a dollar Monday before a rebound.
"The persistent weakness in the Indian rupee is now starting to show its impact on all asset classes including the equities. The "sentiment risk" is now the major challenge for stock markets," said Jagannadham Thunuguntla, Sr VP and Head of Research (Wealth), Centrum Broking Ltd.
From the Sensex basket, 26 stocks ended with losses led by Sun Pharma, Mahindra & Mahindra, Vedanta and IndusInd Bank.
Among sectoral indices, the BSE auto fell the most by 1.75 per cent, followed by metal 1.74 per cent, energy 1.67 per cent and FMCG 1.65 per cent.
At BSE, 1,691 stocks declined, 1,041 advanced, while 195 remained unchanged.
Broader markets also faced selling pressure with the BSE mid-cap index falling 1.68 per cent and small-cap declining 1.07 per cent.
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