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BENGALURU -  Indian shares plunged on Monday as COVID-19 cases continued to rise relentlessly and a hard-hit state considered a stricter lockdown, threatening to derail a recovery in Asia's third-largest economy.

The NSE Nifty 50 index was down 2.44% at 14,474.10 by 0440 GMT, while the S&P BSE Sensex was 2.42% lower at 48,374.94. The two indexes have now retreated 6%-8% from their mid-February record highs.

The rupee continued its decline, falling to a near 8-month low of 74.96 against the dollar.

India on Monday reported another record daily surge in coronavirus cases, with the total now eclipsing Brazil's tally. The state of Maharashtra, home to Mumbai, is considering a lockdown and could take a final decision this week, a senior government official said.

"Since the second wave of the pandemic is turning out worse than expected, there is profound uncertainty about its impact on the economy and markets," said V.K. Vijayakumar, chief investment strategist at Geojit Financial Services.

Given the worsening situation in economically significant Maharashtra, Vijayakumar said the market's assumption of 11% economic growth and above-30% earnings growth could take a hit.

Stocks across most industries declined, with financial shares being hit the hardest. HDFC Bank and HDFC were the two biggest drags on the Nifty 50, falling over 3% each.

Software services firm Infosys was among the few stocks to gain, rising about 1% after a share buyback proposal.

Cipla, Dr Reddy's and Sun Pharma - all sellers of COVID-19 medication - gained 1%-3%.

India's corporate earnings season kicks off from Monday, with Tata Consultancy Services expected to report March-quarter results.

Data on the country's retail inflation for March is also expected later in the day. A Reuters poll of economists predicts that the reading likely edged up to a four-month high in March.