The 30-share Sensex ended 192 points down at 25,895 and the 50-share Nifty closed 70 points lower at 7,721.
Volumes were large because of the expiry of July derivative contracts. Total market turnover stood at Rs 6.79 lakh crore, the third highest so far.
Foreign investors sold $63.4 million worth of equities for the first time in the last ten sessions, as per provisional data released by the stock exchange.
The Indian rupee extended losses and was trading lower at Rs 60.46 compared to the previous close of Rs 60.09 as the dollar strengthened following encouraging GDP data from the US.
Further, weakness in the domestic stock markets also weighed on sentiment.
Major Asian indices ended higher with the exception of Japan.
Japanese shares ended marginally lower amid profit taking after recent gains.
The benchmark Nikkei ended down 0.2% at 15,620.77.
Shanghai Composite gained 0.9% and Hang Seng ended up 0.1% while Straits Times ended 0.6% higher.
European shares which were trading flat in early deals also weakened further. FTSE, CAC-40 and DAX were trading 0.3-1% lower.
BSE Power was the top sectoral loser down 1.4% followed by Bankex down 1.2% among others. Realty and Healthcare indices indices ended with marginal gains.
ICICI Bank ended down 1.4%. The bank reported a net profit of Rs.2,655 crore which was better than what the street had expected. However, Gross NPAs and Net NPAs were tad higher compared to the previous quarter.
Among other banks, HDFC Bank, Axis Bank and SBI ended down 1-1.3% each while mortgage lender HDFC ended 2% lower.
Meanwhile, L&T continue to witness profit taking as the performance of engineering and construction major’s core business in the June quarter disappointed the Street, as execution remained weak in the domestic business.
The stock ended down 1.3%.
Country's largest car-maker Maruti Suzuki India today reported a 20% rise in net profit at Rs 762 crore for the quarter ended June 2014.
It was Rs 632
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