The 30-share index Sensex opened lower at 20,661.07 points and declined further to 20,589.03 before quoting at 20,645.39 at 1030 hours.
It showed a loss of 77.58 points or 0.37 per cent.
The NSE Nifty also moved down by 30.50 points or 0.50 per cent to 6,122.25 at 1030 hours.
Major losers were - Tata Steel 2.10 pct, Tata Power 1.61 pct, SBI 1.31 pct, Axis Bank 1.05 pct, BHEL 0.83 pct and Hindalco 0.81 pct.
Foreign institutional investors bought shares worth Rs 468.47 crore yesterday, as per provisional data from stock exchanges.
Asian stocks declined in their early trade as a private survey showed a faster-than-estimated drop in China's manufacturing in February.
Key benchmark indices in Taiwan, Japan, Hong Kong and South Korea were off 0.14 to 1.68 per cent while indices in China and Singapore were up 0.04 to 0.67 per cent.
A Chinese manufacturing index fell to the lowest level in seven months in February adding to challenges for the government which there is grappling with risks to the financial system from trust defaults and soured loans.
US stocks closed lower yesterday after the minutes from the Federal Reserve's policy setting meeting revealed little consensus about when short-term rates would begin to rise. A larger-than-expected drop in home construction in January also weighed on the sentiment.