Wall Street and European markets suffered heavy losses on Friday as oil prices continued to dive and the mood carried over to the local sharemarket, with the broader All Ordinaries Index falling 0.62 per cent to 5164.60 and the ASX200 down 0.64 per cent to 5186.10.

But the market clawed back some ground from its early morning lows. "It improved considerably from the opening," said BBY senior private client adviser Henry Jennings. "I think there's some bargain hunting. It got through 5150 and maybe that was a signal for people to start dipping their toes back in the water."

Oil prices initially plunged further in Asian trade on Monday, but later in the session reversed trend and were posting small gains in the afternoon.

Investors snapped up bargains in energy stocks, with Woodside climbing 2.28 per cent to $35.39, Santos soaring 4.19 per cent to $7.46 and Oil Search up 1.54 per cent to $7.26. Origin fell 0.73 per cent to $10.83, Senex rocketed 7.84 per cent to 27 cents, Caltex lifted 1.83 per cent to $32.21, Beach Energy rose 1.71 per cent to 89 cents, and Drillsearch went up 3.60 per cent to 72 cents.

Morgans director Bill Chatterton said the decline in the oil price to $US56 per barrel for West Texas intermediate had been "incredibly alarming" for investors.

"Oil and gas has been a shocker over the past few months absolutely, no question. The oil price has gone from $US100 per barrel to $US56 per barrel.

"But energy in the ASX200 is about 8 per cent. Transport is a major input cost to most businesses and petrol has come down a long way. There are benefits out there."

Mr Chatterton said the overall market apart from the energy sector had performed "reasonably" despite the crash in energy stocks.

"There are sectors in the market that have done well. You look at the telcos - Telstra has continued to do extremely well and at the same time is paying very good dividends.

"Other areas have done reasonably well. You look at healthcare - you look at CSL, you look at Sonic, Cochlear. Medibank Private has come on very well.

"You've got to consider what the banks have done, you've got to consider what consumer staples have done.

As a point of comparison, he said, the ASX200 had opened 2014 at 5352.2 - 166 points more than today's close.

The resources giants were down, with BHP dropping 0.46 per cent to $28.33 and Rio losing 0.32 per cent to $53.50.

The banks lost ground. ANZ slipped 0.77 per cent to $30.76, Commonwealth Bank slid 0.57 per cent to $81.27, National Australia Bank dived 1.47 per cent to $31.48 and Westpac lost 0.72 per cent to $31.82.

The federal government's mid-year budget update (MYEFO) was largely shrugged off by investors, as the blow-out in the budget deficit to $40.4 billion in this financial year had been widely expected.