Banks led declines as they form a major portion of index futures, with HDFC Bank losing 1.3 per cent and State Bank of India ending down 1.9 per cent.
Foreign institutional investors sold index futures worth Rs. 1,170 crore over the previous two sessions, turning sellers for the first time since April 16.
Overseas buying in cash shares also slowed to Rs. 77 crore on Monday from Rs. 257 crore on Friday.
Subdued by Sesa Sterlite, Jindal Steel & Power, Hindustan Unilever and Dabur India, also dampened sentiment.
There is a rotation of money happening in the earning season. Some profit-taking is underway which is not bad. Market is getting ready for the election results.
The Sensex fell 0.73 per cent, or 165.42 points, to 22,466.19, while the broader Nifty dropped 0.68 per cent, or 46 points, to 6,715.25.Both the indexes marked their lowest close since April 16.
Caution also prevailed ahead of the US Federal Reserve's two-day meet starting Tuesday, coming at a time of continued tensions between Russia and the West over Ukraine.
Among other bank stocks, Kotak Mahindra Bank fell 2.1 per cent and IndusInd Bank ended down 1.7 per cent.
Consumer goods maker Hindustan Unilever fell 3.2 per cent following disappointment over its January-March sales volume growth.
Other consumer goods stocks also fell, with Dabur India falling 1.3 per cent after its January-March earnings failed to beat estimates, and ITC ending down 0.5 per cent.
Sesa Sterlite fell 1.3 per cent after the company's January-March profit when adjusted for other income, lagged estimates.
Jindal Steel & Power slumped 7.5 per cent after the company said its March-quarter profit fell by 47 per cent to Rs. 403 crore.
Hexaware Technologies shares slumped 10.7 per cent after the company's March-quarter profit fell sharply.
However, IRB Infrastructure Developers gained 2.8 per cent after the company was selected as the preferred bidder to develop and run a toll road project worth Rs. 3,200 crore in Maharashtra.