Analysts said investor sentiment was bullish ahead of the Reserve Bank of India's monetary policy meeting outcome, scheduled for Thursday.

If this fall continues, it is not a good sign for country's macro-economic stability.

Indian stock markets have been ahead of most emerging markets in 2018. India is set to offer attractive returns as earnings recovery pulls in foreign investors.

The fall was led by L&T, IndusInd Bank, PowerGrid, NTPC, TCS, ICICI Bank, Axis Bank, Hero MotoCorp, Bharti Airtel and SBI, declining up to 2.64 per cent.

While the Sensex rose 117 points to 35630, Nifty gained 50 points to 10,721. Of 30 Sensex stocks, 27 were trading in the green

Top Sensex losers were PowerGrid (1.11%), Hero MotoCorp (0.68%) and Bajaj Finance (0.23%).

The year which saw heightened volatility in the Indian market weakened the rationale for foreign investors to infuse their funds into Indian bourses.

State-owned UCO Bank is expected to announce the payment mechanism in the next 10 days.

State-owned UCO Bank is expected to announce the payment mechanism in the next 10 days.

The domestic currency gained 67 paise to rise past the $70 level after US Federal Reserve Chairman Jerome Powell suggested the pace of interest rate increases might slow. The statement spurred US stock markets to an eight-month high and led the dollar lower, resulting in gains for the rupee.

The U-turn by FIIs can be attributed to rising bond yields in the US and weakening emerging market currencies among other factors.

FIIs have been on a withdrawing spree in September and October on the back of US providing more attractive options for investing. In September, they pulled out Rs 21,035 crore from the Indian capital market.