Benchmark indices edged lower amid negative trend seen in Asian markets as Chinese stocks extended previous day's fall and ended lower after briefly ruling higher through the day.
Chinese markets tumbled 7 per cent on Monday on weak factory data which triggered more than 2 per cent fall in domestic markets with the Nifty index posting its biggest single-day percentage fall in over four months.
The 30-share index settled at 25,580.34, down 43.01 points in today's trade, while broad-based 50-share index quoted 7,784.65, down 6.65 points at close.Market breadth turned negative with 18 of the 30 Sensex components trading in red.
Coal India was the worst performer on Sensex and lost 1.6 per cent on BSE.
The caution over global markets comes at a time when domestic investors are concerned about the weak state of India's corporate earnings.
UBS said corporate earnings consensus for FY16, FY17 and FY18 still looked optimistic, and expected about an 8 per cent cut to earnings forecasts this year.
Tata Consultancy Services will kick start the earning season on January 12.
"After the fall yesterday there is some amount of caution that traders are exercising," said Deven Choksey, managing director at KR Choksey Securities.
Among Asian markets, China's Shanghai Composite edged 0.26 per cent lower. Japan's Nikkei also registered 0.42 per cent losses, while Hong Kong's Hang Seng index ended 0.65 per cent down.
Meanwhile, Dow futures were trading lower by 80 points. Overnight, US markets had closed in the negative territory on renewed fears of global slowdown.
A lowdown on markets today
Sensex at 25,589, down 34 points
Nifty at 7,786, down 5 points
Sensex at 25,653.33, up 29.98 points
Nifty at 7,804.60, up 13.30 points
Sensex at 25,586.22, down 37.13 points
Nifty at 7,783.25, down 8.05 points
Sensex at 25,719.41, up 96.06 points
Nifty at 7,824.35, up 33.05 points
(With inputs from Reuters)