Brokers said profit-booking by major market players ahead of the ending of calender year amid steep fall in overseas markets as hopes of solution to the US budget deficit issue mainly pulled down the trading sentiment.
"Global cues also were not supportive as fiscal cliff issues continue to overshadow any other economic news," Amar Ambani, Head of Research, IIFL, said.
Bharti Airtel shares lost 3% on reports of CBI filing charge sheet in connection with alleged irregularities in spectrum allocation during the NDA regime involving three telecom companies.
Asian and European stocks fell from a 19-month high after reports said American House Republicans cancelled a vote on higher taxes for top earners, fuelling concern budget talks will fail.
In 30-share BSE Sensex components, barring ITC and Tata Consultancy Services, all the stocks closed with losses.
The realty sector index suffered the most by losing 3.51% to 2,048.55 followed by metal index by 1.80% to 11,039.17. The capital goods index lost 1.66% to 10,735.11 and banking index by 1.34% to 14,151.18.