After gaining around 488 points in past four sessions, the BSE benchmark index opened higher at 19115.89 after the government yesterday unleashed another round of reforms.
However, the Sensex soon dropped over 200 points mirroring a 900-point fall in NSE Nifty due to a technical glitch caused by sell orders worth Rs 650 crore executed by broker Emkay Global Financial Services.
This halted trade in cash market for 15 minutes, hitting sentiment.
Besides, investors weighed up the fate of the big-ticket economic reforms announced yesterday as some legislations are likely to face stiff opposition in Parliament before final ratification, brokers said.
The 30-share Sensex closed 119.69 points down, or 0.63 per cent, at 18,938.46. The Nifty closed at 5,746.95, down 40.65 points or 0.70 per cent.
"A healthy up move, on back of fresh reforms, was expected in markets today. However, the initial euphoria evaporated due to confusion due of erroneous trades on NSE near start of the day," said Milan Bavishi, Head Research, Inventure Growth & Securities.
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Importantly, the some bills need to be approved by Parliament before becoming a reality and notably, the main opposition party, BJP, seems opposed to raising the FDI limits, said Edelweiss in a report.
HDFC, which lost 4.55 per cent, was the worst hit amid reports that global fund house Carlyle has sold a big chunk of its 3.7 per cent stake today. Wipro, Sun Pharma, Infosys and ICICI Bank were other major losers.
Dealers said gains in Tata Motors, Hindustan Unilever, ONGC and L&T helped the Sensex to pare losses.
Meanwhile, the rupee traded weaker at 51.81 to the dollar, from its last close of 51.74.