Fresh weakness in China too weighed as the Shanghai index fell below the crucial 3,000-mark. Profit-booking was also seen in yesterday's gainers, which had got a boost on easing inflation numbers.
"Participants ignored the CPI inflation data announced post market," said Jayant Manglik President of Retail Distribution at Religare Securities.
Bourses closed in red tracking mixed global cues and lack of conviction among participants ahead of the US Federal Reserve two-day policy meeting starting tomorrow, he added.
The data raised expectations that the Reserve Bank would cut interest rates for the fourth time this year at its policy review due on September 29.
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The 30-share BSE index after shuttling between 25,909.83 and 25,649.37 during the session finally settled lower by 150.77 points or 0.58 per cent at 25,705.93. The gauge had gained 246.49 points in yesterday's session.
The NSE Nifty too edged lower by 43.15 points or 0.55 per cent to end at 7,829.10. Intra-day, it cracked the 7,800-mark to touch a low of 7,799.75 and a high of 7,880.00.
Metal, capital goods, consumer durable, auto and banking shares came under heavy selling pressure.
In overseas markets, most of the Asian markets ended weak following overnight fall in US amid uncertainty ahead of a Fed meet.
Key indices China, Hong Kong, Singapore and Taiwan fell between 0.49 per cent to 3.52 per cent, while Japan and South Korea moved up by 0.32 per cent to 0.34 per cent.
European markets were also lower as key indices in France, Germany and UK moved down by 0.14 per cent to 0.65 per cent.