Investors also turned cautious ahead of the winter session of Parliament which is likely to begin from Thursday as Mamata Banerjee led Trinamool Congress is likely to bring no confidence motion against the incumbent UPA.
The Sensex ended at 18,3329, down 10 points and the 50-share Nifty ended unchanged at 5,571.
Earlier in the day, markets witnessed a positive opening and the Sensex touched the intra-day high of 18,468 and the Nifty touched the high of 5,614.
The Asian markets ended on a weak note as the worries over the US 'fiscal cliff' led to a sell of in the Asian markets. The Hang Seng slipped 34 points to 21,228, Nikkei slipped 10 points to close at 9,142 and the Shanghai Composite also closed lower by 8 points at 2,008.
The European shares and the euro fell on Tuesday after a credit rating agency stripped France of its top-notch rating, reminding investors of the continuing risks from the euro zone debt crisis.
But the falls were limited as the move was widely expected and comes a day after global equity markets saw their biggest gains since late July on optimism that US lawmakers would reach a deal to avert automatic tax hikes and spending cuts due to take effect in early 2013. The CAC, DAX and FTSE slipped 0.2-0.6% each.
Back home, Hindalco was the top Sensex loser, the stock slipped 2% to end at Rs 106. Software major Infosys ended 1.5% lower on profit taking after recent gains.
Capital goods majors L&T and BHEL continued to witness selling pressure and ended down 0.5% each after the sector registered sharp contraction in September.
State Bank of India, Bajaj Auto, Jindal Steel, Jindal Steel, Sterlite Industries, Hero MotoCorp, Cipla, Tata Steel, ONGC, Reliance Industries, ITC and Dr Reddy's Labs and Sun Pharma also ended on a weak note.
On the gaining side, from the auto segment, passenger car makers Mahindra and Mahindra (M&M) ended higher by 3.2% at Rs 938, while Maruti Suzuki gained 0.3% to end at Rs 1,500, on hopes of higher sales this month because of demand pick up during the festival season.
HDFC, country's biggest mortgage lender jumped 2%. Tata Power, Wipro, TCS, Tata Motors, Coal India, HDFC Bank, GAIL India, HUL, Maruti Suzuki and ICICI Bank were also among the notable gainers.
Most of the sectoral indices ended lower. The BSE realty index was the top loser, down 3% or 57 points to close at 1,832. Metal, capital goods, teck, PSU, FMCG, IT, power and bankex were also down 0.4-1% each. While, the auto index was the top gainer on the sectoral front, the index advanced 0.6% to end at 10,575.
Among the individual stocks, City Union Bank ended higher by 3.4% at Rs 61 ahead of rights issue of equity shares. The private sector lender has fixed November 23 as the record date for the purpose of rights issue.
Shares of companies engaged in gems and jewellery business continued their upward march and ended higher by up to 20% on the BSE on hopes of higher demand in coming months.
Vaibhav Gems, C Mahendra Exports, Shrenuj & Co, Thangamayil Jewellery, Tribuhovandas Bhimji Zaveri (TBZ), Shree Ganesh Jewellery House and Renaissance Jewellery are trading higher by 6-20% on the BSE.
Heritage Foods (India) soared 20% to Rs 4500, also its record high, on back of almost ten-fold jump in trading volumes. The stock opened at Rs 418 on the BSE and has seen a combined around one million shares changing hands on the counter till late noon deals.
Multi Commodity Exchange of India (MCX) rallied over 3% to Rs 1,529 after the country's newest stock exchange MCX Stock Exchange (MCX-SX) conducted a mock testing session for its capital market segment on Monday to familiarise participants with its new trading platform.
The broader markets underperformed the benchmark indices after profit taking was seen in mid-cap and small-cap shares. The BSE mid-cap index and small-cap indices ended down 0.8% each.
The overall breadth was negative as 1,802 stocks declined while 1,051 advanced.
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