Benchmark share indices ended their eight-day winning streak on profit taking after they hit fresh all-time highs in the previous session even as selective buying was seen in defensive pharma and FMCG shares.
The 30-share Sensex ended down 145 points at 26,127 and the 50-share Nifty closed 40 points lower at 7,790.
On Thursday, the Sensex registered its longest 8-day rally in the last almost two-years to close a record high on expectation of domestic recovery and strong buying from foreign funds.
The Nifty too recorded its all-time for the second straight session at 7,835.65.
The BSE Sensex surged 1,265 points in the past eight trading days between July 15 and July 24.
ICICI Bank, Reliance Industries, Tata Consultancy Services (TCS), Housing Development Finance Company (HDFC) and Infosys contributed a combined 659 points or 52% to the 1,265-point rally in the Sensex.
Meanwhile, Foreign investors bought Indian shares worth Rs 282 crore on Thursday, as per provisional data on the stock exchange.
Further, Finance Minister Arun Jaitley today ended retrospectivity in higher capital gains tax on debt mutual funds, but only for redemptions made between 1 April to 10 July. Jaitley, however, defended the budget proposal to impose higher capital gains tax, saying the facility was used by corporates mainly for arbitrage.
The Indian rupee came off its day's highs and was trading flat at Rs 60.11 compared to the previous close of Rs 60.12 tracking weakness in domestic equities.
Asian markets ended higher with the shares in Japan and China gaining the most.
Japan's benchmark Nikkei ended up 1.1% to end at 15,457.87.
Chinese shares were up on the back of upbeat PMI data.
The Shanghai Composite ended 1% higher while Hang Seng ended up 0.1%.
However, shares in Singapore witnessed profit taking after recent gains. Straits Times was trading 0.4% lower.
European shares were trading mixed as weak corporate earnings weighed on investor sentiment.
The CAC-40 and DAX were down 0.3-0.6% while FTSE came off its early lows and was trading flat with positive bias.
The BSE Realty index was the top loser down 2.8% followed by Power, Oil and Gas, Metal,
However, defensive sectors were seen higher with FMCG and Healthcare indices gaining 0.7-1.7% each.
Tata Motors was the top Sensex losers which ended nearly 5% lower. Index heavyweight Reliance Industries ended down 1.8% while state-owned ONGC ended nearly 1% lower.
In the banking sector, ICICI Bank, SBI, Axis Bank and HDFC Bank ended down 0.5-2% each.
Capital goods shares which had rallied in the previous sessions also witnessed profit taking with L&T losing 0.4% and BHEL ended 4% lower.
IT major Infosys which had rallied post its first quarter earnings ended down 0.8% while TCS recovered in late trades from its lows to end 0.4% higher.
Wipro which announced its results late Thursday was down nearly 5% because of flat growth in dollar revenues and declining margins from IT services. In dollar terms, IT services revenue was $1,740 million, a sequential increase of 1.2%, Wipro said in a statement.
The operating margin of IT services declined to 22.8%, from 24.5% in the previous quarter, impacted due to wage hikes.
Metal shares which had rallied amid upbeat economic data from China also witnessed profit taking. Sesa Sterlite, Hindalco and Tata Steel ended down 2-3% each.
Among other shares, Shares of Goa Carbon slumped nearly 8% to end at Rs 93 after the company said it has received notice from the State Pollution Control Board, Odisha for closure operations at its Paradeep plant.
Indiabulls Housing Finance zoomed 6% to end at Rs 390 after the company’s consolidated net profit jumped 21% at Rs 424 crore on 19% growth in total revenue to Rs 1603 crore in Q1 June 2014 over the same period last year.
TVS Motor Company ended down 10%, extending its Thursday’s 6% decline on NSE, after reporting net profit of Rs 72 crore against an average analyst estimates of Rs 87 crore for the quarter ended June 30 2014 (Q1).
Biocon dipped 7% after its flagship biopharma business, which contributes close to 75% of the revenues, grew by hardly 1% year-on-year (yoy) at Rs 549 crore for the quarter ended June 30, 2014 (Q1) against Rs 543 crore in year ago quarter.
The broader market also witnessed selling pressure with the BSE Mid-cap index losing 1.3% and the BSE Small-cap index closing 2% lower.
Market breadth weakened further with 1,943 losers and 975 gainers on the BSE.