"He grasped the shovel by the handle" emphasizes where he grasped the shovel (by the handle, as opposed to someplace else.) "He grasped the handle of the shovel" would not emphasize where he was grasping the shovel, more of just stating that he was grasping it. The difference is very subtle, and both sentences are perfectly acceptable lexically and grammatically. However, in my opinion both sound more literary/formal and would be used more in writing than in everyday conversation. In everyday English, we tend to say things like "he held the handle" "he grabbed the handle" or just "he picked up the shovel," depending on what you would want to emphasize.