The 30-scrip Sensex and the broader Nifty extended losses to a sixth straight session on Wednesday, weighed down by selling in IT, pharmaceuticals, FMCG and media sectors.
The Sensex finished 66 points, or 0.25 per cent lower, while broader Nifty settled 21 points, or 0.26 per cent, down at 8,061, after a volatile session in the domestic markets.
The NSE's Volatility Index rose as much as 2.3 per cent at one point during Wednesday's session.
Among the 51 Nifty, 29 finished in the red zone. The Nifty IT, FMCG, pharma and media sub-indices ended between 0.9 per cent and 1.1 per cent lower. TCS, Sun Pharma, ITC, Zee Entertainment and HCL Tech were among the top losers, weighing on the broader markets.
Gains in real estate, consumer durables, energy and metals curbed losses, with were up 0.5 per cent and 1.5 per cent.
Other Asian markets were mostly in the positive zone on Wednesday, hitting a one-year peak while the dollar touched its highest level since December 2002 against a basket of currencies. On Wall Street, the Dow ended Tuesday's session 0.46 per cent higher, just 25 points shy of the magical 20,000 barrier helped by a 1.68 per cent gain in Goldman Sachs. The S&P 500 and the Nasdaq finished with gains of 0.36 per cent and 0.49 per cent, respectively.
The markets are likely to remain in a narrow zone in the near term until the effects of demonetisation pan out with better clarity, according to analysts.
"The feel-good factor has been missing from the market post-demonetisation," said Neeraj Dewan, director at Quantum Securities.
"We will have to wait and watch if the government announces anything substantial early next year to lift investor sentiment. We can then expect a pre-budget rally."
Investors now keep an eye out for the minutes of the Reserve Bank of India's monetary policy committee (MPC) meeting earlier this month, expected later in the day, for clues about the economy and the central bank's stance after demonetisation.
The RBI unexpectedly kept its key policy rate unchanged on December 7, despite calls for action in the face of an intense cash shortage that threatens to slam the brakes on the world's fastest-growing large economy.
(With inputs from Reuters)
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