The BSE Sensex, which had gained 160.87 points in previous two sessions, fell by 50.57 points, or 0.24 per cent to close at 21,143.01, after touching a low of 21,089.21.
Infosys Ltd, ICICI Bank and Larsen & Toubro (L&T) were a drag of the 30-share index. Bajaj Auto and Mahindra & Mahindra Ltd were among 16 Sensex losers. Monthly auto sales are scheduled for release day after tomorrow.
However, BHEL and Coal India led the 14 Sensex gainers.
Sesa Sterlite firmed up after it resume mining operations in Karnataka after two years.
The broad-based 50-share NSE Nifty index declined by 22.70 points, or 0.36 per cent, to end at 6,291.10, and touched the day's low of 6,273.15. Also, SX40 index of MCX Stock Exchange slid by 41.89 points to 12,552.70.
Brokers said profit-booking in recent gainers in IT, including Wipro, and industrial stocks. Absence of foreign investors due to year-end also reduced the volume of activity.
The rupee was trading lower at 62-level versus dollar.
Rate-sensitive stocks declined after RBI Governor Raghuram Rajan today said high inflation is limiting the central bank's ability to boost growth with an accommodative monetary policy.
However, there was a lot of activity in midcap and smallcap scrips. Cement stocks declined on fears related to further pricing pressures while rail stocks were in demand on FDI buzz, said analysts.
Trent jumped 2 per cent on hopes that FIPB would clear Tesco's USD 110 million investment in multi-brand retail.
Welspun Corp surged 10 per cent on the company exiting from its JV with Leighton for USD 99 million.
Sectorally, the BSE Realty sector index suffered the most by losing 1.59 per cent, followed by IT index (0.85 per cent), Banking index (0.67 per cent) and Auto index (0.45 per cent).
* BSE index closes 0.24 pct lower, NSE falls 0.36 pct
* IT stocks down on profit booking
* Cement makers slide on declining prices
* Railroad infra companies jump on FDI hopes
Indian shares fall from 3-week highs as IT majors slide
(Reuters) - Indian shares fell on Monday, retreating from a three-week closing high in the previous session, as investors booked profits in IT bellwethers including Infosys, while cement makers declined on concerns about subdued construction activity.
With only one more session left in the year, Indian stocks are set to post their second successive annual gain, as strong foreign buying this year offset tepid demand from domestic investors and sustained redemptions from mutual funds.
Foreign institutional investors have been buyers for seven consecutive sessions, regulatory and exchange data shows, taking their total investment in Indian equities to $20.1 billion so far this year.
The benchmark BSE index is up 8.4 percent this year, having hit a record high on Dec. 9, compared with a 25.7 percent gain last year.
"Markets are likely to remain flattish, although some activity is expected due to NAV adjustments (by funds), but broadly markets are not likely to show any major fireworks," Sudip Bandyopadhyay, chief executive of Destimoney Securities Pvt Ltd said.
The BSE index fell 0.24 percent to end at 21,143.01, after hitting a three-week closing high on Friday.
The broader NSE index fell 0.36 percent to close at 6,291.10.
Investors booked profits in India's software services companies, with Infosys Ltd falling 1.66 percent to 3,502.35 rupees, after hitting a record high of 3,575 rupees.
Tata Consultancy Services Ltd fell 0.21 percent.
Software exporters have rallied this year aided by a weak rupee coupled with strong recovery in their core U.S. market.
The NSE IT index is up 56.9 percent for the year.
Cement stocks including ACC Ltd and Ambuja Cements Ltd also closed lower on concerns about declining cement prices.
ICICI Securities estimates average prices for cement settled at 289 rupees per bag this month from 304 rupees last month, according to a report from its retail unit ICICI direct.com.
Property developers and infrastructure companies tracked the fall in cement stocks, with DLF Ltd sliding 3.18 percent, while Larsen & Toubro Ltd ending 1.29 percent lower.
Among gainers, India's wagon and railroad infrastructure builders rose after Business Standard newspaper reported the government could allow foreign direct investment in the country's railway sector, citing an unnamed senior government official.
Kalindee Rail Nirman Engineers Ltd jumped 19.94 percent, Titagarh Wagons Ltd closed 9.98 percent higher, Texmaco Rail & Engineering Ltd rose 12.5 higher and Hind Rectifiers Ltd ended up 12.23 percent.
Trent Ltd rose 1.99 percent on anticipations ahead of government approval on Tesco Plc's proposal to invest $110 million to set up supermarkets in the country.
Sesa Sterlite Ltd ended 0.72 percent higher after the miner said a committee appointed by the country's top court had allowed it to resume mining activities in the southern Indian state of Karnataka.
FACTORS TO WATCH
* Yen falls against on stimulus expectations
* Brent steadies on unrest in South Sudan, Libya
* World Shares ending bumper year
* Foreign institutional investor flows