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The BSE Sensex fell on Tuesday after two sessions of gains, as investors booked profits in recent outperformers such as Oil and Natural Gas Corp (ONGC) and Tata Motors ahead of derivatives expiry later this week.
The expiry of derivatives on Thursday typically sparks volatile trading. This month will also mark the end of the quarter and the calendar year. Markets are closed on Wednesday for the Christmas holiday.
Still, broader sentiment remains underpinned by strong buying by foreign institutional investors, even after the US Federal Reserve last week announced the start of a reduction in bond purchases.
FIIs bought Rs 135 crore of shares on Monday, according to exchange and regulatory data, bringing their total over the three sessions since the Fed decision to $514.2 million, as global markets have extended gains.
The Sensex closed down points 68.32, or 0.32 per cent, at 21,032.71, after gaining 1.9 per cent in the previous two sessions. The Nifty fell 16.10 points, or 0.26 per cent, to 6,268.40.
Some recent outperforming blue-chips fell, with Tata Motors down 0.8 per cent after gaining 2.4 per cent over the previous four sessions.
ONGC fell 1.1 per cent after rallying 5.5 per cent over the previous four sessions.
Shares of Sesa Sterlite, controlled by billionaire Anil Agarwal, closed down 2.28 per cent after India's top investigating agency said it started a probe into possible irregularities in its stake buy in Hindustan Zinc back in 2006.
Hindustan Zinc, in which Agarwal's Vedanta Resources has a 64.9 percent stake, closed lower 2.15 per cent.
However, among gainers, Infosys, which fell 2.3 per cent on Monday, closed higher 0.52 per cent on bargain-buying.
Shares in Apollo Tyres ended up 7.9 per cent after rising to their highest since September 2012 as investors bet the company will drop its $2.5 billion deal to buy US-based Cooper Tire & Rubber Co.
