The BSE benchmark index, which had gained 229 points in the last two trading sessions, fell by 38.40 points, or 0.21 per cent to close at 17,846.86.
In the 30-share Sensex, 18 stocks declined led by Bharti Airtel which dropped 3.85 per cent on reports that foreign brokerage Credit Suisse has downgraded it. NTPC, Sterlite, Gail and RIL also fell around one per cent each.
Dr Reddy's that gained 1.05 per cent led Sensex gainers, followed by CIL, Infosys, Bajaj Auto, Hero MotoCorp and Cipla helped cushion Sensex from a sharper fall.
The trading sentiment also remained lacklustre as global markets were cautious ahead of Luxembourg Prime Minister Jean-Claude Juncker, the head of the Euro Group of Finance Ministers visiting Greece today, brokers said.
"Volatility was high as markets pared gains in the latter session and went into negative terrain. European indices were also cautious ahead of the meeting scheduled today between the Greek PM and the Eurogroup Head," said Nidhi Sarswat, Senior Research Analyst, Bonanza Portfolio.
Employees of public sector banks have gone on two-day nationwide strike today opposing banking sector reforms and outsourcing of non-core activities, affecting stock market fund flows, said analysts.
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The market breadth at the BSE turned negative as 1,459 stocks finished with losses while 1,341 ended with gains.
On similar lines, the wide-based National Stock Exchange index Nifty lost 8.15 points to end at 5,412.85.
Asian stocks closed on a weak note after recent rally after Japan reported a wider-than-expected trade deficit. (MORE)