The broader NSE Nifty 50 index closed down 1.81% at 10,607.35 and the benchmark S&P BSE Sensex ended 1.8% lower at 36,033.06, dragged by losses in banking and auto stocks.

Coronavirus cases in the world's second-most populous country rose to 906,752 as of Tuesday morning, according to the federal health ministry data https://www.mohfw.gov.in.

The industrial hub of Pune, near India's financial capital Mumbai, and the southern city of Bengaluru announced fresh lockdowns starting this week following a surge in cases.

Banking and financial stocks fell for a third session as worries mount over bad debt and a loan repayment moratorium that threatens to hurt revenue. The Nifty banking closed down 3.16%, while the financials index ended 2.45% lower.

Rating agency Moody's on Monday also warned of pandemic-related headwinds to the Indian banking sector.

The Nifty auto index closed down 2.38% at its lowest level since January 2019, after an industry body report said auto sales for June nearly halved from a year ago.

India's auto sales volume will take another 3-4 years to reach 2018 levels, an executive from the Society of Indian Automobile Manufacturers said.

Asian shares also slipped on flaring U.S.-China tensions and persisting virus fears.

Private-sector lenders Indusind Bank and Axis Bank were the top percentage laggards on the domestic blue-chip Nifty index, shedding 5.5% and 5%, respectively.

Truck and motorcycle maker Eicher Motors dropped 4% and India's largest carmaker by market share Maruti Suzuki declined 3.6%.

The NSE pharma index advanced 0.4% and was the session's only gainer among sectors. Generic drugmaker Dr. Reddy's Laboratories rose 2.14% was among the few advancing stocks.

(Reporting by Derek Francis in Bengaluru; Editing by Rashmi Aich)