Benchmark indices ended nearly 1% lower, amid weak global cues, with FMCG major ITC leading the decline on worries that post the proposed amendments to the GST Bill would result in higher effective tax rate for the company.
Investors are awaiting the outcome on the Goods and Services Tax constitutional amendment bill in Parliament.
According to reports, the long-pending GST Bill is listed for consideration and passage in Rajya Sabha today amidst strong indications that the most far-reaching taxation reform would be supported by Congress and all other major political parties.
The government is keen to get the GST Bill approved during the Monsoon Session of Parliament ending on August 12, 2016.
The S&P BSE Sensex ended down 284 points at 27,698 and the Nifty50 slipped 78 points to settle at 8,545.
Among broader markets, BSE Midcap and the Smallcap index fell by 1% each.
"Companies that are likely to lose include ITC, Titan, DB Corp, Jagran Prakashan, HT Media and Ashok Leyland," Motilal Oswal securities said in a note.
Nikhil Kamath, Co-founder & Director, Zerodha added, “FII numbers continue to remain positive and the PCR at 0.75 indicates a bullish outlook amongst retail participants.
"We remain cautious ahead of the news event, and would like it to play out in the interim before adding substantial positions.
"Technically, indices remain in a firm bull trend over the medium term and we would recommend holding on to longs at this juncture."
In overseas stock markets, European and Asian markets edged lower after US stocks took their biggest loss in almost a month yesterday, underscoring simmering worries about global economic growth.
Meanwhile, growth in China's services sector cooled in July, a private survey showed today.
The Caixin/Markit services purchasing managers' index fell to 51.7 in July on a seasonally adjusted basis, from an 11-month peak of 52.7 in June.
US stocks fell yesterday on the back of disappointing auto sales and a steep drop for retailers on forecasts of poor summer sales.
Back home, India's services sector output recovered to a three-month high of 51.9 in July as compared to the previous month of June as new business grew at a faster pace, a business survey showed on Wednesday.
Among key stocks, ITC, Tata Motors, Maruti Suzuki, Reliance Inds and Power Grid declined between 1%-3%.
FMCG major ITC was among the top losers down over 3% on concerns that the effective tax rate on the goods manufacture would increase substantially after implementation of the amendments to the GST Bill. Its peer Hindustan Unilever was down nearly 1%.
Infosys invested $4 million to pick a minority stake in Israel's cloud management and optimisation startup Cloudy, helping it access technology and skills to get it to customers transitioning from legacy infrastructure to the cloud.
The stock ended flat.
HCL Technologies was up over 3% after the IT major reported 6% growth in revenue and profit for the quarter ended June 2016. The company has also forecasted revenue growth of 12-14% for the current fiscal.
However, TCS and Infosys were down 0.7% each.
Shares of companies in the logistics sector ended mixed ahead of the Goods and Services Tax (GST) Bill that is likely to be tabled in Rajya Sabha today.
Most these stocks have partially erased early losses on the Bombay Stock Exchange.
Snowman Logistics, GATI, Allcargo Logistics, VRL Logistics, Patel Integrated and Transport Corporation of India are some stocks in this segment dipped, by 1%-7%.
Snowman Logistics, GATI, Transport Corporation of India, VRL Logistics and Allcargo Logistics had surged more than 25% each on the BSE.
Kalyani Steels rallied 14%, after hitting 52-week high on the BSE in intra-day trade, on the back of heavy volumes, in otherwise weak market.