The S&P CNX Nifty shed 81 points to close at 6194 levels.
The bourses have been witnessing selling pressure owing to the Power Grid follow on public offer.
"Many frontline counters are seeing profit booking and money is getting shifted towards fresh issues," Ashish Chaturmohta, vice president-derivates, from Angel Broking said.
The Inflation data also played a spoil sport. The food price index surged to 12.3% and fuel price index spiked to 10.7% year-on-year.
The whole sale price index was up 8.6% in September versus annual rise of 8.5%.
Other markets across Asia also ended on a mixed note. Japan's Nikkei Stock Average was up 0.3%, South Korea's Kospi Composite was up 0.2%, Hong Kong's Hang Seng Index rose 0.8%, and China's Shanghai Composite was up 1%.
Although consumer price index rose 4.4% in China, other data on fixed asset investments indicated that the Chinese economy was on a firm ground.
Back in India, quarterly earnings continued to determine the direction of the stock. Ranbaxy soured to six year high of Rs 625 (up 3.5%) after consolidated net profit for the third quarter more than doubled to Rs 308 crore.
The stock pared most of the gains and plunged 3.1% to Rs 585 by close of trade. DLF cracked 4.7% to Rs 346 after the September 2010 quarter net profit dropped 5% y-o-y to Rs 418 crore.
Bharti Airtel continued its losing streak for the second day in a row. The stock fell over 3% to Rs 317.
Analysts said 3G roll out can be used as an opportunity to exit from the telecom stocks. Rishi Nathany, director, Touchstone Wealth Planners said: "We continue to be negative on the telecom sector, there could be some short-term pullbacks in this sector due to the 3G rollout, which could be used as an opportunity to exit."
Top losers on the benchmark besides DLF and Bharti Airtel were TCS (down 2.5%), Larsen & Tourbo (down 1.3%), Reliance Industries (down 1.9%) and ICICI Bank (down 1.3%).
Only five components on the benchmark were trading in the green. Among other Sensex gainers, Hindalco soured 2.7% after RBS upgraded the stock to buy, Tata Power (up 1.5%), Mahindra and Mahindra (up 0.9%) and Reliance Infrastrcuture (up 1.2%)
Also among individual stocks, Reliance Power was unperturbed as shares hit a jackpot; the stock surged 8% to Rs 190 on reports that the company signed a pact with the US's General Electric Co. (GE) worth Rs 10,000 crore to implement a 2400 mega-watt power plant.
Reliance power has been an actively traded call on the options chart. Ashish Chaturmohta said: "After a long time stock has seen buying interest, open interest has risen by 4% on the long side suggesting stock can test 195-200 levels in coming days."
High beta realty stocks witnessed selling pressure led by DLF, HDIDL (down 4%) and Sobha Developers (down 3.6%). Oil & Gas shares were also among the top sectors losers; HPCL (down 3.9%), ONGC (down 2.1%) and Gail India (down 1.8%).
While the markets are taking a breather for the past few sessions, analysts continue to be bullish on the benchmark in the long-run.
"At current juncture we don't think that the Indian markets have run-up ahead of their fundamentals. We expect Sensex to be around 21,600 levels by March," stated Sarabjit Kour Nangra, vice president-research, Angel Broking.
Broader markets also ended in the red. Midcap index skidded 1.1% and the BSE smallcap index was down 0.5%. Market breadth was negative with 1687 stocks declining as compared to 1291 that advanced.
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