The BSE benchmark Sensex falls 0.7 per cent after hitting its highest intraday level since November 2010 on caution ahead of the October 17 deadline to lift the US debt ceiling.
Meanwhile, the NSE Nifty falls 0.83 per cent, after earlier hitting its highest intra-day level since May 2013.
Indian markets are closed on Wednesday for a public holiday.
Banking stocks fall as odds of a rate hike in October are seen to have increased after data on Monday showed both consumer and wholesale inflation accelerated last month.
Tata Motors falls 1.7 per cent after hitting an all-time high Rs 393.30 rupees on Monday.
Earlier, The BSE Sensex rose nearly 143 points in early trade with Reliance Industries leading the rally as it posted better-than-expected second quarter earnings.
Besides, a firming trend in the global markets also buoyed the trading sentiment here.
The 30-share index, which had gained 712.44 points in the previous five sessions, rose further by 142.95 points, or 0.69 per cent, to 20,750.49, with stocks of oil and gas, realty, IT, auto and banking sectors leading the rise in early trade.
On similar lines, the National Stock Exchange index Nifty rose by 36.75 points, or 0.60 per cent, to 6,149.45.
Buying activity gathered momentum after Reliance Industries posted better-than-expected second quarter earnings, brokers said.
A firming trend in the Asian region spurred by hopes of a deal to end a US government shutdown and raise its borrowing limit further generated buying by participants, they said.
Stock of Reliance Industries (RIL) climbed 1.68 per cent to Rs 884.90 in early trade after the company reported a 1.5 per cent increase in net profit.
Profit rose to Rs 5,490 crore in July-September quarter from Rs 5,409 crore in the year-ago period.
Stocks of Tata Consultancy Services (TCS) continued to rise ahead of second quarter results and rose 1.79 per cent to trade at a fresh 52-week high of