Persistent selling in metal and auto shares amid capital outflows and weak European trends dampened investor sentiment.
During the day, the Sensex logged a high of 16,671.81 as RBI announced a string of measures to limit the weakness of rupee, the worst-performing Asian currency.
However, it failed to hold to the gains and declined to a low of 16,377.02 when European markets opened weak. It finally closed at 16,420.05, a loss of 59.53 points or 0.36 per cent.
"Markets inched up on bargain buying. Banks and capital goods stocks led the rally in the morning session. Stocks continued to inch up wards as the session progressed during the afternoon. However, volatility came to the fore in the late afternoon session," said Shanu Goel, Senior Research Analyst, Bonanza Portfolio.
Index heavyweight RIL, which has lost nearly 6 per cent in the last five days, had logged gains intra-day but closed flat at Rs 694.65.
Auto stocks bore the brunt of investors after data showed passenger car sales in India witnessed slowest growth during April in 10 years. Maruti, Hero MotoCorp, Tata Motors and Bajaj Auto fell in the 1-3 per cent range.
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Metals stocks such as Jindal Steel, Sterlite Industries and Hindalco fell between 1.3-2.7 per cent on reports of soft base metal prices in overseas markets.
The NSE 50-share Nifty also moved down further by 9.10 points or 0.18 per cent to end at 4,965.70. (MORE)