The National Stock Exchange of India (NSE) building in Mumbai. File / AP

Indian shares recorded their biggest one-day percentage drop in 10 months on Monday, tracking a selloff in global markets as investors turned jittery over escalating tensions between Russia and the West over Ukraine.

The NSE Nifty 50 index ended 3.06% lower at 16,842.80, while the S&P BSE Sensex dropped 3% to 56,405.84, both marking their worst day since mid-April 2021.

The Nifty volatility index, which indicates the degree of volatility traders expect over the next 30 days, jumped 25.52%.

Warnings that Russia could invade Ukraine at any time sent global shares skidding and oil prices to seven-year peaks.

"It (the threat of war) is likely to have a short-term impact since the risk of actual elongated war between two nuclear powers is quite limited," said TIW Private Equity managing partner Mohit Ralhan.

"It is expected the tensions will dissipate through geopolitical manoeuvres over the next few weeks, but market volatility will be high."

Investors are also awaiting India's January retail inflation data, due later in the day.

If crude oil remains at levels close to $95 per barrel for a while, continued accommodative monetary stance would be difficult, said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

The Nifty banking index fell 4.2%, extending losses for a second session, while the public sector banking index slumped 6%.

Tata Consultancy Services was the lone gainer on the Nifty, adding 1.05%, while all sectoral indexes ended in the red.

State-run Life Insurance Corp of India filed draft papers with the market regulator on Sunday to sell 5% of its shares to potentially raise nearly $8 billion, dwarfing the biggest IPO in Asia's third-largest economy by a considerable margin.

Meanwhile, India's federal investigation agency filed a police complaint against ABG Shipyard Ltd and its promoters, accusing it of defrauding lenders of Rs228.42 billion.

Reuters