The 30-share index resumed higher at 29,316.58 against last close of 29,231.41 points. The barometer firmed up further to 29,362.96 on initial buying in early trade.
However, selling in bluechips like RIL, ITC and SBI in late trade dragged the index down to 28,913.16 before ending at 28,975.11, a loss of 256.30 points or 0.88 percent. It had lost 230 points in previous trade on Friday.
All the BSE sectoral indices dropped up to 1.91 percent due to widespread selling by cautious investors.
The 50-share Nifty of NSE also moved down by 78.65 points or 0.89 percent to finish at 8,754.95.
"Markets started on a weak note ahead of the crucial Budget week dragged by Oil & Gas and Banking Sectors," HBJ apital Senior Analyst Aamir Mir said.
Reliance Industries fell the most by 2.53 percent among the Sensex stocks. GAIL fell by 2.22 percent while Axis Bank lost 2.04 percent.
HDFC, ITC, SBI and Infosys which fell up to two percent were among major losers. Tata Steel, ONGC, Hindustan Unilever, Bajaj Auto, Tata Power and Hindalco also fell up to 1.87 percent.
Pharma giant Lupin fell by 2.5 percent after it said that the US Food and Drug Administration has raised concerns over production process at its Pithampur plant.
"Falling crude prices, bleak economic outlook by US Fed and relief amidst tensions over Greek economy, mixed sentiments amongst domestic market players due to constant flow of news and events related to union budget kept markets volatile today," said Hiren Dhakan, Associate Fund manager, Bonanza Portfolio.
The stock market may remain volatile this week ahead of the expiry of futures and options February contract on coming on Thursday and presentation of budget on Saturday, brokers said.
Foreign portfolio investors sold shares worth a net Rs 89.41 crore in the previous session, as per provisional data released by the stock exchanges.

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