Failing to hold on to its early gains, the benchmark BSE Sensex slipped into the negative zone, falling 131.34 points to 27,970.38, mainly due to fresh selling in metal, power, capital goods and auto sectors.
The Sensex started well at 28,193.26 and hit a high of 28,205.12 driven by initial buying, mainly in IT and technology, following a fall in the rupee against the dollar after China devalued yuan.
However, it dropped afterwards to 28,013.17 on selling in metal, power and capital goods sectors before trading at 27,970.38 at 1202 hours, a loss of of 131.34 points, or 0.47 per cent.
The 50-share Nifty was also down 41.50 points at 8,484.10 at 1202 hours.
Major losers were Tata Motors (1.88 per cent ) followed by HUL (1.47 per cent), BHEL (1.22 per cent), NTPC (1.14 per cent) and Sun Pharma (0.83 per cent).
However, Infosys firmed up 1.92 per cent followed by SBI 1.29 per cent, TCS 1.21 per cent and Cipla 1.01 per cent.
In overseas markets, Asian stocks edged lower after China's central bank moved to devalue its tightly controlled currency. US stocks surged yesterday buoyed by remarks from a Federal Reserve official suggesting a September rate hike may not be a done deal as well as from a bounceback in Chinese equities.
Key indices in China, Taiwan, Indonesia, Japan and Singapore were off 0.18 per cent to 0.99 per cent while indices in South Korea and Hong Kong were up 0.03 per cent to 0.96 per cent.
In the foreign exchange market, the rupee fell below 64 against the dollar, tracking a stronger US dollar after China devalued the yuan by nearly 2 per cent.
