Benchmark Sensex declined by 331 points and Nifty closed below the 26,000 mark on Monday amid last-minute selling by cautious investors and foreign fund outflows.

Paring early gains, the 30-share BSE Sensex declined by 331.21 points or 0.39 per cent to settle below 85,000 at 84,900.71. During the day, it dropped 521.81 points or 0.61 per cent to 84,710.11.

The 50-share NSE Nifty fell by 108.65 points or 0.42 per cent to 25,959.50. The index opened on a positive note and moved in a narrow range for most of the session, but a sharp decline in the final half hour dragged it lower.

Among Sensex firms, Bharat Electronics, Mahindra & Mahindra, Tata Steel, UltraTech Cement, Bajaj Finserv and Tata Motors Passenger Vehicles were the major laggards.

However, Tech Mahindra, Asian Paints, Infosys, Adani Ports, Sun Pharma and HDFC Bank were the gainers.

In Asian markets, Shanghai's SSE Composite index and Hong Kong's Hang Seng index settled in positive territory while South Korea's Kospi ended lower. Equity markets in Japan were closed for a holiday.

Markets in Europe were trading in the green. US markets ended higher on Friday.

"After a range-bound positive session, the market closed with a decline in the last half hour, led by Monday expiry, as Nifty-50 indices could not survive above the key threshold of 26,000. Investor sentiment remained cautious, in anticipation of key event risk like delays in finalizing the interim US-India trade agreement.

"Nonetheless, selective buying in IT stocks offered some support. On a brighter note, global markets remain optimistic, fueled by renewed expectations of a December Fed rate cut, prompted by downside risks to US employment data," Vinod Nair, Head of Research, Geojit Investments Limited, said.

Broader market sentiment was weak as the BSE smallcap gauge dropped 0.83 per cent and midcap index declined 0.27 per cent.

Among sectoral indices, realty tanked 2.10 per cent, followed by capital goods (1.34 per cent), utilities (1.24 per cent), metal (1.21 per cent), power (1.19 per cent) and commodities (1.16 per cent).

IT, teck and BSE Focused IT were the gainers.

A total of 3,033 stocks declined while 1,209 advanced and 207 remained unchanged on the BSE.

"Benchmark Indices traded in a range for most part of the session. However sharp sell-off in the last hour of trade saw the index closing the day down by 0.5% ahead of the monthly expiry, as volatility escalated amid concerns around interest-rate policy, persistent FII selling, uncertain trade and tariff developments, and broader market weakness," according to Bajaj Broking Research.

Foreign institutional investors (FIIs) offloaded equities worth Rs 1,766.05 crore on Friday, however, Domestic Institutional Investors (DIIs) bought stocks worth Rs 3,161.61 crore, according to exchange data.

Brent crude, the global oil benchmark, dipped 0.98 per cent to USD 61.95 per barrel.

On Friday, the Sensex declined 400.76 points or 0.47 per cent to settle at 85,231.92. The Nifty dropped 124 points or 0.47 per cent to 26,068.15.