The 30-share Sensex, which had surged 562 points in the past four sessions, ended the day at 24,298.02, down 78.86 points or 0.32 per cent from its previous close.
Capital goods, banking, oil and gas and healthcare sector stocks recorded losses.
The NSE Nifty eased by 22.60 points to close the day at 7,252.90. It touched a low of 7,206.70 during the day.
The four-day rally before today's losses saw the BSE Sensex and NSE Nifty climbing to life-time high of 25,375.63 and 7,563.50 points on May 16, when the Narendra Modi's BJP-led NDA swept the polls.
Brokers said the market was in over-bought position following recent record setting spree on robust capital inflows on expectations of a stable government. Bourses saw emergence of selling by foreign funds after remaining major buyers for nearly one month on Indian bourses, they added.
Foreign institutional investors (FIIs) sold shares worth a net Rs 104.53 crore yesterday as per provisional data from stock exchanges.
They said the fall was somewhat cushioned by gains IT, realty, auto, FMCG, power and consumer durables and PSU stocks which maintained their upward journey on sustained buying.
Bucking the trend, small and mid-cap stocks attracted buying.
The mid-cap index rose by 1.34 per cent to 8,342.36 and the small-cap index gained 1.84 per cent to 8,758.28.
Essar Oil zoomed 15.59 per cent to Rs 89.70 and MRPL ended 11.37 per cent higher at Rs 75.40 largely on the back strong Q4 earnings.
In the 30-BSE index components, 21 stocks declined, led by Reliance Industries. GAIL, Larsen and Toubro, BHEL, Maruti Suzuki, SBI, ICICI Bank, Axis Bank, HDFC Bank, Hero Motocorp, Sun Pharma, Bharti Airtel, Tata Steel, Tata Power and Tata Motors were other prominent losers.
The capital goods section index suffered the most by losing 1.63 per cent to end at 14,392.84, followed by banking index at 1.07 per cent. Consumer durables index shed 0.42 per cent, healtchare index lost 0.35 per cent and Oil and gas index by 0.26 per cent.
Shrikant Chouhan, Head- Technical Research, Kotak Securities: Nifty opened the day on a flattish note and selling got accelerated as index was not able to trade above 7290 levels. Selling got arrested at 7210 levels with benchmark ending the day on a marginal negative note. Important support for the market stands at 7210 and 7130 levels. On higher side resistance levels stands at 7290 and 7350 levels. Overall trend remains positive above 7290 levels, till that lackluster trading activity can be expected for days to come.
BSE Sensex snaps 4-day election rally as profit-booking emerges
(Reuters) Indian shares snapped a four-session winning streak on Wednesday as blue chips, including Larsen & Toubro Ltd, retreated from recent strong gains a day after foreign investors turned net sellers for the first time in about a month.
Foreign investors sold Indian cash shares worth a net 1.04 billion rupees ($17.8 million) on Tuesday, their first selling since April 16, provisional exchange data showed.
Investors took that milestone as an opportunity to take profits in recent outperformers, especially in domestic-oriented sectors that have led a powerful rally in anticipation of a victory for Bharatiya Janata Party and Narendra Modi, its candidate for prime minister.
"I do not think the market would take profit-taking or small sales by FIIs seriously. FII interest in India has increased considerably on hopes that policy bottlenecks would be removed soon," said Arun Gopalan, vice-president of research and fund manager at Systematix Shares.
The benchmark BSE index fell 0.32 percent, or 78.86 points, to end at 24,298.02, retreating from a record closing high hit a day earlier.
The index still remains below the all-time high of 25,375.63 hit on Friday, when the BJP won a clear majority in the country's elections.
The broader NSE index lost 0.31 percent, or 22.60 points, to end at 7,252.90.
Domestic-oriented stocks fell after leading the recent rally on expectations that a Modi-led government would pass major reforms to revive an economy growing at its slowest in a decade.
Among capital goods makers, Larsen & Toubro declined 2.2 percent after marking its highest in 6-1/2 years in the previous session, while Bharat Heavy Electricals lost 2.4 percent.
UltraTech Cement slumped 3.2 percent, while ACC fell 2.9 percent.
The NSE bank sub-index fell 1.1 percent, heading for a second day of falls on profit-taking after making a record closing high on Monday.
State Bank of India lost 2.7 percent, Axis Bank ended down 2.3 percent, HDFC Bank fell 0.8 percent and ICICI Bank ended 0.6 percent lower.
Sun Pharmaceutical Industries Ltd fell 1.8 percent after the USFDA said on Tuesday that the drugmaker's response to a U.S. import ban on one of its plants lacked "sufficient corrective actions."
But among the gainers, Bajaj Auto Ltd rose 5.1 percent after the motorcycle maker's management issued a better-than-expected outlook in a conference call with analysts.