The Sensex resumed lower in the morning and remained in negative till afternoon session to log day's low of 17,471.37.
Brokers said investors also adopted a cautious stance as they await policy action from Finance Minister P Chidambaram.
"Markets are eagerly awaiting follow-up action from FM," said Dipen Shah, Head - PCG Research, Kotak Securities.
Later, Sensex tried to recover on strength in IT stocks but failed to sustain momentum as consumer durable, auto and bank counters witnessed selling pressure. It finally closed at 17,557.74, a fall of 3.13 points over yesterday's close.
Similarly, the 50-share NSE ended also lower by 2.55 points at 5,320.40 as buyers remained selective.
In the 30-share Sensex, HUL, Sterlite, Maruti and Infosys which rose around 1.5-2 per cent range led the 13 gainers.
The BSE benchmark index has lost 41 points in the previous two days amid stock-specific activity in earnings season, said traders.
During the day, SBI reported a 137 per cent jump in net profit at Rs 3,752 crore for the first quarter ended June 30, though rising non-performing loans continue to be a cause of concern. The stock closed 4.26 per cent down at Rs 1,887.95.
Shares of Sun Pharma ended 0.20 per cent down after it posted 58.79 per cent rise in consolidated net profit for the April-June quarter.
Asian shares closed narrowly mixed after the latest data showed China's trade surplus unexpectedly narrowed in July.
Key benchmark indices in China, Hong Kong and Japan ended lower while from Singapore, South Korea and Taiwan closed higher. European markets too were quoting lower in the afternoon deals. (MORE)
