The BSE Sensex fell 140 points to 19,451.45 due to persistent selling pressure on concerns over corporate earnings as crude oil prices rose to over two year highs and the strengthening of the rupee, which hit IT stocks.
Realty and Auto stocks fell on profit booking after the recent strong gains. Banking shares dropped on worries as high inflation and rising interest rates could hurt future profits.
The 30-share Bombay Stock Exchange index Sensex resumed higher at 19,602.81 and shot up further to the day's high of 19,697.21. However, it failed to maintain initial gains on profit-booking and declined to 19,388.42 before finishing at 19,451.45 - down 139.73 points or 0.71%.
Sensex lost 111 points in the previous three sessions.
The NSE 50-share Nifty also dropped by 43.70 points or 0.74% to finish at 5,842.00.
Brokers said investors were booking profits after rally in March, when the index had gained over 9%.
Besides, they said the selling was confined more to software exporting companies as rupee strengthened against the US dollar. IT companies get maximum business from abroad and appreciation in the rupee dent their earnings.
High global commodity prices will add to pressure on profit margins of corporates as high oil prices will fan inflation, leading to higher interest rates. US crude oil futures up by USD 1.23 a barrel at USD 111.53 a barrel.
Meanwhile, FIIs bought shares worth a net Rs 220.59 crore on Thursday.
"The stock market is taking a breather. Today's fall was on the back of profit-booking by the investors who have taken a pause for the moment," Unicon Financial Services CEO Gajendra Nagpal said.
Meanwhile, Amar Ambani, Head of Research (India Private Clients) - IIFL said, "The market is consolidating after notching up strong gains in the past few days. There are not many catalysts that could take the market further up from here in the near term."
He added that on the local front, the attention will shift to Q4 corporate earnings. FII inflows and inflation are the other two variables one should keep a close eye on, Ambani said.