The ecological health of Damodar River is assessed and pollution indicator algal species have been identified in this study. The weathered lateritic formations of Chotanagpur resulted in high concentration of Fe (126–820 µg l–1) and Mn (10–114 µg l–1). Contamination indices indicate low to moderate pollution for Mn, Ni, and Cu in the sediment. The dominance of Chlorophyceae (29 species) has been observed. Saprobic index, ranged from oligo to beta-mesosaprobic, which promotes diversity of species with high saprobic value. Canonical Correspondence Analysis (CCA) revealed that nutrients, TDS, HCO3, EC, Fe, Mn, and Zn has been the driving factors for the distribution of phytoplankton. Geminelliaspp has been identified as biosensor for low pollution, Spirogyra, Cladophora, Nitzschia, Cyclotella, Oedogonium bioindicator for Fe, Mn and Zn, Cladophora glomerata, Oscillatoria princeps, Phacus spp., Scenedesmus spp., Synedra spp. – bioindicator of organic pollutants