The 30-share Sensex ended down 50 points at 27,440 and the 50-share Nifty closed 7 points lower at 8,324.
"Yesterday's rally was mainly because of short covering with ONGC leading the gains. However, markets failed to sustain gains today as profit taking is seen emerging at higher levels. Further, stock specific action is seen post the fourth quarter earnings," said Deven Choksey, Managing Director, KR Choksey Shares & Securities.
RUPEE
The rupee was trading at 63.46 per dollar after a long trading holiday as foreign flows into debt have been slowing.
CRUDE OIL
Brent crude oil futures eased to $66.89 a barrel after hitting a 2015 high of $67.08 per barrrel on the London Stock Exchange.
Meanwhile, a strong dollar also weighed on the commodity while investors are looking forward to US crude oil inventory data due later this week.
GLOBAL MARKETS
Major Asian stock markets ended lower on Tuesday with Chinese shares witnessing a sharp sell-off amid local media reports that some Chinese brokerages have introduced stringent norms for margin financing.
The Shanghai Composite slumped 4.2% weighed down by bank shares.
Hong Kong's Hang Seng ended down 1.3% tracking losses in the mainland while Singapore's Straits Times ended down 0.3%.
SECTORS & STOCKS
BSE Metal index was the top gainer up 2.9% followed by Oil and Gas, Realty, Healthcare and FMCG among others.
IT shares ended mixed after US-based Cognizant reported 9.7% growth in net profit for the quarter to $382.9 million compared with the corresponding period last year.
TCS ended up 1.5% after a foreign brokerage upgraded the stock. Wipro ended up 0.7%. However, Infosys, HCL Tech and Tech Mahindra ended 0.3-1.5% lower.
The ministry of finance has cut export duty on iron ore (for 58% fe grade and below) from 30% to 10% from June 1, 2015. Vedanta was the top gainer up 6.7% while Tata Steel gained 5%. NMDC ended up 4.1%.
Hindalco surged 4.7%. According to reports the company need not apply for fresh environment clearances (EC) for four blocks allotted to them in the recent auction as the government has transferred to them the approvals granted to the earlier allottees.
Sun Pharma’s subsidiary Taro Pharma hiked prices of its two products Enalapril Maleate and Econazole nitrate cream in US. Both drugs together could add incremental sales of $20-25 million.
The move can boost Taro's current run-rate of sales by 3 per cent and EBITDA by 4 per cent. Sun Pharma ended 1.1% higher.
ONGC extended gains to end 4.2% higher on reports that the government will foot the entire subsidy bill that oil marketing companies incur on selling LPG and kerosene below market prices in FY2016.
So far, ONGC, Oil India and Gail had to share a part of their profits to finance the subsidy burden of downstream firms such as Indian Oil, BPCL and HPCL.
Engineering and construction giant Larsen & Toubro (L&T) has made a renewed bid to secure mining rights over Sijimali and Kutrumali bauxite deposits across Kalahandi and Rayagada districts after the enforcement of the Mines & Minerals (Development & Regulation) Act, MMDR Act, 2015.
The stock ended up 1.8%.
Kotak Mahindra Bank ended up 6% after reporting a better-than-expected 29% year-on-year jump in its standalone net profit at Rs 527 crore for the quarter ended March 2015 (Q4).
Meanwhile, the board of directors of the bank approved issue of bonus shares in the ratio of 1:1.
Auto shares ended mixed after gains yesterday on the back of good sales numbers. M&M, Hero MotoCorp and Bajaj Auto ended down 1.3-1.9% each. Maruti Suzuki, Tata Motors ended up nearly 1% each.
Shares of defence equipment and manufacturers were in focus and rallied by up to 7% on expectation of favourable regulatory changes that will accelerate investment flow into the sector. Bharat Electronics rallied 4% and BEML gained 2.5%.
In the broader market, the BSE Mid-cap index ended up 0.6% and Small-cap index ended flat.
Market breadth ended neutral with 1,376 gainers and 1,377 losers on the BSE.