Snapping its two-day winning streak, the markets ended in the red on Wednesday owing to weakness in energy majors and select IT and banking stocks.
The BSE benchmark index, Sensex closed down 101 points at 18,394.
Of the total 101 points shed by the Sensex on Wednesday, heavwieghts Reliance, HDFC, ONGC and Infosys accounted for a loss of 61 points.
The NSE Nifty settled with a loss of 29 points at 5,526.
The broader markets, however, held ground in the downfall.
The smallcap index closed up 0.2% at 8,319 while the midcap index was flat at 6,929, both outperfroming the Sensex which was down 0.5%.
This is the second consecutive day when the broader markets have exhibited stength.
Earlier in the day, the markets opened lower tracking weak Asian peers after US Federal Reserve Chairman Ben Bernanke's statement that US economy was growing very slowly.
Thereafter, key benchmark indices rebounded into the positive zone for a brief while, with the Sensex touching a high of 18,505.
However, due to the weakness in index index heavyweights RIL and ONGC the markets slipped and dropped sharply in the afternoon trades to touch a low of 18,366, down 139 points from the day's high.
Weak opening in the European markets further dampened the sentiment.
Amid apprehensions of a moderation in economic growth from the projected 9% this fiscal, Finance Secretary Sunil Mitra on Wednesday said the revenue collection targets for the current fiscal will not be easy to achieve.
The government has set the indirect tax collection target for the current fiscal at Rs 3.92 lakh crore and for direct taxes at Rs 5.32 lakh crore.
Meanwhile at Citi investor conference, deputy governor of the Reserve Bank of India stated that Inflation
Airline stocks moved up over on Wednesday as the crude oil prices declined.
Jet fuel prices are linked to crude oil prices which constitutes 40% of the operating cost for airliners. erasing its earlier gains, NYMEX crude fell on speculation that OPEC will raise output quotas when it meets in Europe later on Wednesday.
Jet Airways was the top gainer which closed up 0.6% at Rs 461, which recorded a record 2 million passengers in May 2011.
Among the sectoral indices, yesterday's laggard FMCG rose on defensive buying adding nearly 1%. Consumer Durables up 0.6% was the only other index that closed in the positive.
The movers in the FMCG space were United Breweries which zoomed 6% followed by Tata Global and Hindustan Unilever which added 4% and nearly 2% respectively.
The upmove in the Consumer Durables space was due to Whirlpool and VIP Industries which added between 2 and 5%.
Reliance Communication was the top gainer among the Sensex stocks for the day, up 2% at Rs 94.
The company on Wednesday said that rating agency ICRA has revised the long term rating of the company at LAA level and reaffirmed its rating of A1+ for short-term fund based/ non fund based limits.
NTPC up 1% at Rs 175 was another notable gainer on reports that the company is among 12 other power firms that will receive coal for their newly commissioned power projects.
Among the top losers on the Sensex are Hero Honda (Rs 1768) down nearly 4% followed by ONGC (Rs 270), Hindalco (Rs 184), HDFC (Rs 659), Bajaj Auto (Rs 1335), Maruti Suzuki (Rs 1226), Sterlite Industries (Rs 166) and HDFC Bank (Rs 2355) which shed 1% each.
The market breadth was negative.
Of the total 2951 stocks traded on the BSE, 1431 stocks have declined while 1385 advanced.
