The rising threat of war between Ukraine and Russia spooked markets and sent investors scurrying for relative safety, pushing global stocks down sharply and lifting gold to a four-month high.
Sentiment also soured after data late on Friday showed the economy grew a below-than-expected 4.7 percent in the October-December quarter, while data released on Saturday showed activity in China's factory sector hit an eight-month low in February.
Any resurgence of global risk aversion could threaten the recent strong buying in Indian shares, which has been based on increased confidence in the country's effort to stabilise the currency and reduce its current account deficit.
NSE's volatility index advanced 7.8 percent, its biggest single day gain since January 27.
Currently there is no change in the positive view. If a war breaks out, crude could surge higher, troubling India to that extent.The BSE index fell 0.82 percent, or 173.47 points, to end at 20,946.65, marking its biggest single-day fall since February 20.
Nifty lost 0.88 percent, or 55.50 points, to end at 6,221.45, snapping a five-day winning streak that saw the index gain 3.1 percent.
Overseas investors have been buyers of Indian shares in each of the previous 11 sessions, totalling a net $733.5 million, while domestic mutual funds and insurance companies turned net buyers on Friday, for the first time since February 12.
ICICI Bank Ltd fell 1.4 percent, while HCL Technologies Ltd slumped 4.5 percent.Among other stocks, Tata Motors fell 1.5 percent after marking its record high of 418.20 rupees on Friday, while Tata Consultancy Services lost 1.6 percent.
Jaiprakash Power Ventures Ltd slumped 15.4 percent on worries the power company had sold two hydroelectric power plants to a consortium led by Abu Dhabi National Energy Co for less than expected.Shares of its parent company, Jaiprakash Associates Ltd (NSI:JPASSOCIAT), also lost 3.3 percent.
Lupin fell 1.3 percent on profit-taking after marking an all-time high of 1,002.40 rupees on Friday.Sun Pharmaceutical Industries fell 3 percent after Bank of America Merrill Lynch downgraded the stock to "neutral" from "buy", saying some of its key drugs will face tough competition.
However, Astrazeneca Pharma India Ltd surged 20 percent to its maximum daily limit after the drug maker said its board would meet on Wednesday to discuss a delisting proposal.
Voltas Ltd also rose 1.4 percent after the maker of air conditioners and cooling products said on Friday it had formed a joint venture with the Singapore unit of Dow Chemical Co for water and waste water treatment.