The FTSE 100 index, which had recovered on Friday after the World Health Organisation issued a measured assessment of the virus, stumbled 1.4pc by 0839 GMT, set for its worst daily performance since early December.
All but three stocks were in negative territory on the main bourse in early dealings.
The midcaps were 1.3pc lower, but Finablr helped contain some losses as it jumped 7pc after reassuring markets that it had sought clarifications from BRS, an investment vehicle owned by Shetty that pledged over half the company's stock as security against certain debts.
Finablr, which had lost nearly one-third of its market value due to Friday's fall, was headed for its best day since late November.
News that China's death toll from the coronavirus discovered at the end of last year has risen to 81 spooked investors and dragged an index of leisure and airline stocks down nearly 2pc to its lowest since mid-December.
Nearly 5pc has been wiped off the index since last week.
The sector is exposed to a slowdown in the travel market because of the outbreak, with some standout individual losers including British Airways owner IAG, which dropped 5pc, and China-exposed luxury brand Burberry, down 4.8pc.
By the end of Sunday, 2,744 cases of the virus had been recorded, with countries including the United States and Singapore having confirmed the spread of the virus.
"This has the potential to really rattle markets. And with stock markets having been at or very near all-time highs before all this broke, this is a perfect selling opportunity," Markets.com analyst Neil Wilson wrote.
"If politics is hard to grasp for most buysiders then virology is impossible - that is enough reason to see de-risking to happen; although I would still anticipate dips to be bought."
Sustained falls in travel-related bluechip stocks over the last few trading sessions has left the main index with a 1pc loss so far this year.