A no-confidence motion by the Congress and the TDP in the Lok Sabha against the Modi government weighed on the market.
The Sensex erased opening gains to close 147 points lower at 36,373 and the Nifty slipping 28 points to close below 11,000.
The broader markets fell in-line with benchmark peers. The Nifty Midcap index edged 191 points lower to 18,018 and the Nifty Bank declined 127 points to 26,881. Market breadth was also was in favour of declines with the advance-decline ratio at 1:3 at close.
Amongst sectors, besides oil and gas, capital goods and media, all the sectoral indices closed in the red. The FMCG, autos and telecom sectors were the top losers.
HUL was the top index loser, followed by Tata Steel, M&M and Axis Bank. In the midcap space, Ashok Leyland continued its downfall post an increase in permissible truck axle load. The Chennai-based auto company saw a fall of over 14 percent in today’s trade.
On the earnings front, UltraTech reported earnings in-line to marginally better than estimates. Revenue came in at Rs 8,655 crore against poll of Rs 8,742 crore, profit at Rs 598 crore against an estimate of Rs 604 crore. Margin improved to 18.78 percent against the poll of 18.1 percent.
In the futures market, the call option of 11,100 saw maximum addition of shares in the open interest with premium slipping 28 percent. And, amongst Put calls 10,900 saw 5.7 lakh shares were shed in the open interest with premium surging 39 percent. Nifty July Futures closed with a premium of six points against a premium of 16 points on Tuesday.
On the global front, Asian shares closed mixed, although investors were still assured by the upbeat remarks from Federal Reserve Chairman Jerome Powell during his congressional testimony. In Tokyo, the Nikkei 225 rose 0.4 percent to close at 22,794, recording its fourth consecutive session of gains.
Exporters rose as the yen remained weak, with automakers tacking on 1.2 percent. Also contributing to the morning's sharp gains were oil and coal sector shares.
The Topix oil and coal products subindex jumped 2.2 percent, recovering after tanking earlier this week on the drop in oil prices.
Elsewhere, the S&P/ASX 200 added 0.7 percent to end at 6,245, with health care and materials the top-performing sectors. Other major markets in the region finished in negative territory.
Over in Seoul, the Kospi gave up early gains, closing lower by 0.3 percent at 2,290. Tech stocks recorded significant gains, with index heavyweight Samsung Electronics rising 1.5 percent, but were offset by losses in other major sectors, including automakers, steelmakers and construction.
Hong Kong's Hang Seng Index reversed gains to slip 0.2 percent, with energy and materials leading losses, with CNOOC falling 2.6 percent before the market close. China stocks extended losses, with the Shanghai composite slipping 0.4 percent to 2,788, marking its fourth straight day of declines.The smaller Shenzhen composite slid 0.7 percent to end at 1,588. Those declines came as the Chinese currency touched its lowest levels around two weeks earlier.