 "Sensex, Nifty retreat from record highs on profit taking")
Profit-booking was seen in most of the recent outperformers such as banks, while metal stocks were under pressure ahead of the Supreme Court's verdict on "illegal" coal mines.
However, sentiment remained upbeat as overseas investors bought shares worth $193 million on Monday, continuing their buying streak for a sixth straight session, exchange and regulatory data showed. They have pumped $13.8 billion into Indian equities so far this year.
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Regional markets were muted with MSCI's broadest index of Asia-Pacific shares outside Japan down 0.1 per cent. "FIIs are giving one-sided support. There could be some profit booking, but overall sentiment remains positive," said Suresh Parmar, head, institutional equities at KJMC Capital Markets.
The benchmark BSE Sensex closed 0.2 per cent lower at 27,265.32 after hitting an all-time high of 27,354.99 on Monday. The broader Nifty ended 0.26 per cent down at 8,152.95 after surging to a record high of 8,180.20 in the previous session.
Market heavyweights were under selling pressure. ONGC, which gained 2.62 per cent in the previous session, closed 1.3 per cent lower, while ICICI Bank fell 1.4 per cent after a gain of 1.3 per cent on Monday.
Metal stocks were under pressure, with Hindalco Industries down 0.3 per cent, ahead of the Supreme Court's hearing on "illegal" coal block allocations later in the day.
Investors took profits in some large-cap infrastructure stocks such as Larsen & Toubro Ltd (L&T). L&T ended 1.5 per cent lower, but is up 49.9 per cent this year. Bharat Heavy Electricals closed down 1.2 per cent, but has gained 25 per cent so far this year.
Among gainers, ABB India rose 3.6 per cent after parent ABB said it would buy back $4 billion of shares.
Tyre companies also gained, adding to sharp spikes on Monday, on weak natural rubber prices that are at multi-year lows. Apollo Tyres gained 0.7 per cent.