The market snapped four days of gains on Tuesday with the Sensex and Nifty falling over 1 percent lower, tracking weak global markets after Korea fired a ballistic missile that flew over Japan before plunging into the northern Pacific Ocean.
While the Sensex closed 362 points or 1.14 percent lower at 31,388 level, Nifty closed 1.18 percent or 116 points lower at 9,796.
The Nifty closed below the 50-day moving average (DMA) of 9,810 on Tuesday.
JP Associates (9.57 percent), India Cements (5.05 percent) and Firstsource Solutions (4.87 percent) were the top losers on the BSE.
"Early negativity from Asian markets over North Korea followed through to the domestic market," said Anand James, chief market strategist with Geojit Financial Services.
"Investors are also booking profits after Nifty tested 9,900 levels on Monday while there is some volatility ahead of the expiry," he added.
On the 30 stock Sensex, NTPC (2.80 percent), Sun Pharma (2.35 percent), HDFC (2.20 percent) and Reliance Industries (2.17 percent) were the top losers. Mahindra and Mahindra (0.25 percent) and Wipro (0.02 percent) were the lone gainers on the index.
All sectoral indices on the BSE ended in the red with the bankex and consumer durables falling 290 and 258 points, respectively.
Bank Nifty too fell 248 points to 24,128 level.
NTPC which started a 5 percent stake sale today fell up to 4 percent in early trade and closed 2.80 percent lower on the BSE.
The Rs 7,000-crore share sale in India's largest power producer, NTPC, got off to a bumper start, with non-retail investors lapping up the quota reserved for them before close of market hours.
Market breadth was negative with 828 stocks closing higher against 1736 ending in the red on the BSE.
On Tuesday, the 30-share BSE Sensex rallied 154.76 points to 31,750.82 and the 50-share NSE Nifty gained 55.75 points at 9,912.80 despite subdued global cues.
The Asian region was rattled by an aggressive test-flight over Japan that sends a clear message of defiance as Washington and Seoul conduct war games nearby.
France's CAC 40 dipped nearly 1.0 percent in early trading to 5,030.32, while Germany's DAX fell 0.8 percent to 12,021.52. Britain's FTSE 100 lost nearly 0.1 percent to 7,329.63. U.S. shares were also set to drift lower with Dow futures down 0.5 percent at 21,691. S&P 500 futures were also lower, down 0.6 percent, at 2,428.20.
Japan's benchmark Nikkei 225 fell 0.5 percent to finish at 19,362.55, while Australia's S&P/ASX 200 dipped 0.7 percent to 5,669.00. South Korea's Kospi lost 0.2 percent to 2,364.74. Hong Kong's Hang Seng shed 0.1 percent to 27,828.67, while the Shanghai Composite inched up nearly 0.1 percent to 3,365.23.