The BSE benchmark Sensex fell for second day to close below its important psychological level of 28,500 on Monday owing to selling in oil & gas, FMCG and metal heavyweights.
The broader Nifty also edged lower led by selling in blue chip stocks like Hindustan Unilever, HDFC, TCS, ITC and Reliance Industries.
The investors and traders turned cautious today ahead of US Federal Reserve's two-day meet which will start from tomorrow.
Analysts expect the US Fed chair Janet Yellen to go in for rate hike earlier than expected as the key jobs data in US has been showing steady signs of recovery.
If the US Federal Reserve hikes its interest rates then the money would flow into the US bonds from the emerging market equities like India.
Selling pressure was visible across the sectors. Metal, FMCG and oil & gas were the worst hit with the indices falling around 1 per cent each.
Cairn India was the top losers from the Nifty stocks. The stock ended 3 per cent lower at Rs 219 after the I-T department slapped the company with a tax demand of Rs 20,495 crore in relation to the 2007 listing of the company.
Sesa Sterlite, Hindalco, Bharti Airtel, NTPC, ACC, HDFC, ITC, Hindustan Unilever, TCS and Reliance Industries also closed lower by over 1 per cent each.
On the other hand, DLF closed 4.5 per cent higher at Rs 164 surging for the second day after the company announced that it has delayed compulsory conversion of preference shares.
DLF has deferred compulsory conversion of preference shares by a period of 1-year until March 2018, 2016. The move cuts DLF's preference dividend payout obligations of Rs 144 crore to FY16.
Asian Paints, HCL Technologies, Bank of Baroda, BHEL, Infosys, Sun Pharma and Punjab National Bank also ended higher by over 1 per cent each.
Shares of airline companies such as SpiceJet and Jet Airways ended higher in trades today on reports that the government plans to abolish 5/20 rule.
According the 5/20 rules, for an airlines to start international operations it needs to have minimum five years of domestic operations and fleet of 20 aircrafts.
The mid-cap and small-cap indices also edged lower and underperformed the benchmark indices.
The overall breadth was negative as 1,859 stocks declined on the BSE while 1,024 stocks advanced.
The Sensex finally closed at 28,438, down 66 points and the 50-share Nifty slipped 15 points to settle at 8,633.
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