The 30-pack index hit the day's high of 27,798.13 in early trade on value-buying in recently battered blue-chips.
However, higher levels could not be sustained due to selling, dragging down the Sensex into the negative zone to a low of 27,540.60 before ending 114.06 points, or 0.41 per cent, down at 27,573.66.
This is gauge's lowest closing since June 19 and has now lost 635.10 in three consecutive sessions.
Market showed some signs of recovery in early trade largely in line with a firming trend at other Asian markets and rebound in Chinese stocks as the government announced more measures to arrest a market slump, equity brokers said.
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A cautious stance from the participants booking profits ahead of the TCS earnings announcement wiped off early gains.
Other Sensex losers included Vedanta, Bajaj Auto, Tata Motors, NTPC and ONGC.
On the 30-share pack, 20 closed with losses.
Sector-wise, oil & gas suffered the most, followed by IT.
Broader markets were affected too, with the BSE small-cap and mid-cap indices falling up to 0.33 per cent.
Globally, other Asian markets ended higher with China mainland index Shanghai Composite rebounding 5.76 per cent and European markets showing a better trend in opening trade.
Meanwhile, foreign portfolio investors (FPIs) sold shares worth Rs 354.32 crore yesterday, as per provisional data.