Markets closed the session on a weak note weighed down by software technology shares on the back of sharp increase in US visa fees.
Further, traders have also turned cautious in a truncated week. The stock exchanges will be closed for trading on Friday on account of Christmas Day.
The S&P BSE Sensex closed lower by 145.25 points at 25,590.65 and the Nifty50 fell 48.35 points at 7,786.10.
Among broader markets, BSE Midcap and Small Cap indices ended marginally lower.
“After forming monthly double bottom at 7,539 and 7,551, crossing 8,340 is very important if we have to assume worst is over for market in near term. The Nifty could rally towards 8,200 if 7,800 is held.
"As the calendar year 2015 comes to close, buying by fund managers to increase the NAV can also boost market. Further, if Bankruptcy Bill is cleared by the parliament then banking stocks which have been laggards in last six months may start to perform,” adds AK Prabhakar, Head of Research, IDBI Capital.
On the macro-economic front, the government introduced the 'Insolvency and Bankruptcy Code 2015', or the bankruptcy Bill, in the Lok Sabha on Monday.
The Bill is one of the steps that Finance Minister Arun Jaitley has identified as crucial for India to improve ease of doing business.
The Bill has been introduced as a money Bill, which means it will not have to be passed in the Rajya Sabha, where the government has struggled to get legislative work done.
The winter session of the parliament ends on Wednesday, December 23.
According to Morgan Stanley report, the Indian economy is likely to witness a "slow but sustainable" recovery and is expected to clock a GDP growth of 7.5% this fiscal.
In the currency front, the rupee appreciated by another 4 paise to 66.31 against the US dollar extending its winning streak for the sixth day on continued selling of the American currency by banks and exporters.
Meanwhile, oil prices came off from multi-year lows as the northern hemisphere moves into the peak-demand winter season.
However, oversupply and mild weather conditions are likely to affect the prices.
In the overseas markets, Asian shares edged higher on Tuesday, taking solace from Wall Street gains and some stability in recently weak crude oil prices, though gains were capped by caution ahead of this week's holidays.
MSCI's broadest index of Asia-Pacific shares outside Japan was 0.4% higher in afternoon trade, after Wall Street logged solid gains overnight. Australia's index added 0.2%.
China's index was slightly higher, erasing earlier losses, while the Shanghai Composite was off its lows and down 0.1% after the previous day's rally.
Japan's Nikkei stock index ended down 0.2%, though above its early session lows.
Back home, IT majors reeled under selling spell on the back of sharp increase in US visa fees.
Almost all Indian IT companies would pay between $8,000 and $10,000 per H-1B visa from April 1, when the next annual H-1B visa filing session starts, thus making it unsustainable for them. Infosys, TCS and Wipro were down 0.1%-2%.
Adani Ports and Special Economic Zone (APSEZ) and Asian Paints have replaced Vedanta and Hindalco Industries from the 30-share S&P BSE Sensex with effect from yesterday. Adani Port slipped over 1% whereas Asian Paints gained marginally.
Telecom shares witnessing buying demand.
The stocks including Idea Cellular, Bharti Airtel and Reliance Communication are trading higher by 1%-3% each after the government decided not to take any coercive action against telecom service providers for call drops till 6 January.
The mobile operators has moved the Delhi high court challenging the Telecom Regulatory Authority of India’s tariff order making it mandatory for them to compensate subscribers for the very first three calls dropped per day at the rate of Rs.1 per dropped call from 1 January.
Further, RCom has entered into discussions with promoters of Aircel for a possible merger, after over a month of announcement of a similar deal with MTS, Indian unit of Russia's Sistema Group.
Mahindra & Mahindra will commercially launch electric variants of its Verito (pictured) passenger car and Maxximo mini truck by February and is in talks with cab aggregators to boost sales of more environmental-friendly cars in the country. Shares of M&M were down over 1.5%.
SBI said its board of directors had authorised the bank to raise up to Rs 12,000 crore of tier-II capital through Basel-III compliant bonds by way of private placement. SBI slipped around 1%.
Among other shares, JBF Industries moved higher by 13% to Rs 253 on the NSE after the company announced a plan to raise funds by issue shares to global private equity investor KKR at price of Rs 300 per share on a preferential basis.
Shares of Mangalam Drugs & Organics were locked in lower circuit for the 10 straight trading sessions, down 5% at Rs 265 on the BSE.
Marcio dipped over 4% on profit booking after the stock turned ex-bonus today in the ratio of 1:1 i.e. one bonus equity share for every one share held.
HDIL ended higher by almost 4%, extending its previous day’s 6% rally on the BSE, after the real estate developer sold development rights of its land parcel at Kurla to DK Realty (India) for Rs 650 crore.
Image: A shocked trader. Photograph: Reuters