Indian shares plunged to fresh five-month lows, led by losses in metals and public sector bank stocks, in a global selloff due to the escalating Sino-US trade war, while the government's move to remove special status of the occupied Kashmir region also stoked worry.

The Chinese yuan broke below the psychological 7-per-dollar threshold after US President Donald Trump abruptly decided on Thursday to slap 10 per cent tariffs on the remaining $300 billion in Chinese imports. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.7pc.

The Indian rupee hit its weakest level since Mid-May at 70.49 rupees per dollar.

Prime Minister Narendra Modi's government introduced plans to weaken the special rights of residents in Kashmir, amid heavy deployment of security forces and suspension of phone and internet services in the valley.

“There is uncertainty in how the situation evolves, and it adds political uncertainty to the existing set of issues the market is dealing with,” said Sunil Sharma, Chief Investment Officer at Sanctum Wealth Management.

Domestic investor sentiment in equities, which seemed to be upbeat on Friday after reports said the government was looking into foreign portfolio investors' tax concerns, returned to being bearish due the escalating trade war.

The broader NSE index was down 1.11pc at 10,868.25 as of 0801 GMT, while the benchmark BSE index was 1.11pc lower at 36,670.62.

“The economy is in doldrums and steps taken won't give a boost in the short-term. The global economy is also doing much better than the domestic economy,” said Madhumita Ghosh, Associate Dean at Tasmac Global Solutions.

“We don't see any trigger for markets to go up in the short term.” Most sectors were trading in the red.

The Nifty public sector bank index plummeted as much as 5.12%, while the metals index sank as much as 3.9%, their lowest in over three years. The Nifty autos index slithered down about 1.9pc.

Nifty IT was the only index trading higher, boosted by the weak rupee.

The India volatility index shot up as much as 16.16%, its highest in over two months.

Yes Bank was the top loser among the Nifty stocks and fell about 6.7%, while Tata Motors was down 4.7pc. Among the few gainers were Tata Consultancy Services , up 1.4%, and Infosys Ltd, which rose 0.5pc.

Pakistan's dollar bonds fall

Pakistan's dollar bonds fell across the curve on Monday after India's government revoked the special status of Kashmir in an effort to fully integrate its only Muslim-majority region with the rest of the country.

The bonds have been under pressure in recent days on renewed tension over Kashmir, which is claimed by both India and Pakistan, but Monday's move by the government triggered a new fall, with Pakistan's 2027 issue losing 1.7pc cents in the dollar to reach its lowest level in more than a month, according to Tradeweb.