Stocks of realty, banking, metal and capital goods sectors led the fall.
The 30-share index, which had touched a new life-time intra-day high of 22,792.49 in yesterday's trade, slipped by 149.30 points, or 0.66 per cent, to 22,566.03. It had rallied nearly 372 points in the past two sessions.
The NSE Nifty moved down by 41.00 points, or 0.60 per cent, to 6,755.40. It breached 6800 level for the first time to touch a new high of 6,819.05 in yesterday's trade.
Brokers said besides profit-booking by speculators after the recent rally, a cautious approach adopted by funds ahead of industrial production (IIP) data for February to be released later in the day contributed to the decline.
Besides, a weakening trend in the other Asian markets following overnight losses on the US bourses on concerns about the valuations of high-flying technology companies dampened the trading sentiments here, they said.
Among other Asian markets, Hong Kong's Hang Seng was down 0.36 per cent while Japan's Nikkei fell 2.88 per cent in early trade today.
The US Dow Jones Industrial Average ended 1.62 per cent lower in yesterday's trade.
BSE Sensex, NSE Nifty retreat from life-high on global slump
India's BSE index is down 0.6 percent, while the broader NSE index is 0.56 percent lower, retreating from record highs hit on Thursday.
Shares are being dragged down by a slide in the region as steep falls in US technology and biotechnology stocks are spreading to other sectors and regions.
Traders also cite caution ahead of February factory output data due later in the day, while due next week are consumer inflation data and the start of quarterly earnings reports.
Among blue chips, Housing Development Finance Corporation Ltd falls 1.4 percent while Reliance Industries is down 0.8 percent.
Bank shares fall 1.2 percent after a central bank panel recommended a slew of measures, including potentially changing how lending rates are set for the sector, raising worries about overall profitability.