The stock markets ended down with National Stock Exchange's 50-share Nifty index slipping below key 5,900 support levels on profit-booking in software makers and index-heavyweights.
Investors shrugged off IT stocks on the last day of December derivatives expiry as concerns over companies' profitability in the coming quarters weighted on sentiments.
Meanwhile, lack of concrete resolution to US budget negotiations also fanned risk-off sentiments .
The Bombay Stock Exchange's Sensex index fell 93.66 points to end at 19,323.80 while the National Stock Exchange's Nifty-50 index declined 35.50 points and ended at 5,870.10.
Asian shares ended mixed ahead of the US 'fiscal-cliff' talks after lawmakers returned early from their Christmas breaks and amid growth optimism after the Japanese premier pledged to take reform measures to support growth in world's third-biggest economy.
China's Shanghai Composite fell 0.6% to 2,205, Singapore's Straits Times rose 0.23% to 3,188, Hong Kong's Hang Seng was up 0.35% to 22,620 while Japan's Nikkei gained 1% to 10,321.
MSCI Asia Pacific index outside Japan rose 0.38% to 894.98.
European shares opened on a flat note but recovered later. France's CAC gained 0.66% to 3,676.90, Germany's DAX rose 0.25% to 7,655 while UK's FTSE traded up 0.22% to 5,967.76 in early trades.
On the domestic front, all sectoral indices ended down barring autos and PSUs. The key losers among sectors included IT, metals, consumer durables, FMCG, capital goods on BSE.
Among key Sensex stocks, BHEL fell 2%, Reliance Industries declined 1.2% while Jindal Steel, Sterlite and Hindalco Industries declined over 1.5% each in metal space.
Infosys was down 1% to Rs 2286.85, while TCS lost 0.8% to Rs 1250.15.
In the auto space, Bajaj Auto was down 0.3%, Mahindra & Mahindra and Hero MotoCorp fell 1% and 0.3% while ICICI Bank and HDFC Bank declined 1% and 0.3% respectively on BSE.
On the other hand, Tata Motors rose 1.3%, ONGC gained 1%, Dr Reddy's added 0.5% and Maruti Suzuki rose 0.15% on BSE.
The other key notable movers include Aurobindo Pharma, which gained after the company said it had received final approvals from USFDA to manufacture and market Nafcillin Injections in the US.
Clariant Chemicals moved higher by 3% to Rs 639 after the company said that SK Capital had agreed to purchase textile chemicals, paper specialties and emulsions businesses for an undisclosed amount.
Hotel Leelaventure surged 2% to Rs 30 on back of heavy volumes on reports that Reliance Industries (RIL) would buy the company’s business park in Chennai for Rs 172 crore.
Kalpataru Power Transmission ended higher by 3% at Rs 92 after the company said it had received new orders worth over Rs 955 crore for supply and installation of transmission lines.
The BSE mid-cap and small-cap declined nearly 0.4-0.7%.
The overall market breadth was weak as 1,666 stocks declined while 1,230 stocks advanced on the BSE.
