The Sensex trimmed early gains to close 115 points lower at 35,432 on losses in healthcare, capital goods, metal and auto stocks. ICICI Bank (1.47%), Reliance Industries (1.22%) and HDFC (0.35%) were the top Sensex gainers. M&M (2.11%), ONGC (1.90%) and PowerGrid (1.88%) were the top Sensex losers.
The 30-share Sensex, which rose over 131 points in morning trade and hit the session's high of 35,678, quickly lost momentum and slumped to hit the day's low of 35,396. It finally ended 114.94 points, or 0.32 per cent lower at 35,432.
The Sensex rose 260 points in the previous session.
The broader NSE Nifty moved between 10,809 and 10,725, before finishing 30 points, or 0.29 per cent down at 10,741.
Unabated capital outflows by foreign funds and weakening rupee too weighed on the sentiment, brokers said.
Bucking the trend, Reliance Industries continued its upward trajectory, spurting 1.09 per cent to a fresh closing high of Rs 1,031.
BSE Midcaps and small caps indexes closed 0.53% and 0.79% lower, respectively.
Most Asian and European markets traded lower on uncertainty surrounding trade relations between the US and China.VK Sharma, head private client group and capital market strategy at HDFC Securities said, "Trade war worries between China and USA is clouding the sentiment in global markets. The worry is that if tariffs continue to rise, it could slow down the global growth and investor confidence. However, the saving grace is that many issues like this either don't end up happening, or they don't happen in the worst-case scenario. A lot of what we've seen is just rhetoric.
Nifty consolidated around 10,750 mark for the day. Midcap and small cap indices erased yesterday's gains and closed lower by 0.5% and 1%. PSU banks, Pharmaceuticals and Metals stocks bore the brunt of selling.
The OPEC meets tomorrow in Vienna. Crude oil prices are correcting in expectation of increase of supply of 1 million barrels. If this increase in production is announced, it will be positive for Indian market.
For Nifty , 10,700 continues to be a good support and 10,900 as resistance. We expect markets are likely to honour the low of 10,700 mark."
Market breadth was negative with 830 stocks closing in the green compared with 1,764 ending in the red.Meanwhile, on a net basis, foreign portfolio investors (FPIs) sold shares worth Rs 1,442.61 crore, while domestic institutional investors (DIIs) bought equities worth Rs 1,473.65 crore yesterday, provisional data showed.
Frances CAC 40 was almost unchanged at percent at 5,372.70 in early trading. Britain's FTSE 100 rose by 0.3 percent to 7,652.80, but Germany's DAX shed 0.3 percent to 12,679.00. U.S. shares were set to drift higher with Dow futures edging up less than 0.1 percent to 24671 and S&P 500 futures up 0.1 percent to 2775.6.
Japan's benchmark Nikkei 225 index finished up 0.6 percent at 22,693.04, and Australia's S&P/ASX 200 climbed 1.0 percent to 6,232.10. South Korea's Kospi dropped 1.0 percent to 2,339.95. Hong Kong's Hang Seng and the Shanghai Composite also fell, Hong Kong by 1.4 percent to 29,296.05 and Shanghai by 1.4 percent to 2,875.81.
Markets have been on edge with the U.S. and China announcing tariffs on each other's imports and threatening more. After a global drop on Tuesday, markets rebounded Wednesday and remain stable as the sting of President Donald Trump's tariff threats fade.