The Bombay Stock Exchange 30-share gauge after opening on a better note, rose to touch a high of 20,890.48 points.
However, emergence of profit-taking shaved off gains and the index closed at 20,693.24 points, logging a fall of 94.06 points, or 0.45 per cent. This is its lowest closing since 20,612.14 on December 17, 2013.
Infosys (1.62 per cent), RIL (1.49 per cent) and TCS (1.4 per cent) contributed most to the decline in Sensex. Tata Steel, Tata Power and Hindalco led the 18 index stocks lower.
However 12 Sensex stocks, including, Maruti Suzuki, Larsen and Toubro, BHEL and ITC notched up smart gains.
The barometer has lost over 477 points in five sessions.
On the similar lines, the 50-share NSE index Nifty also moved down by 29.20 points, or 0.47 per cent, to 6,162.25, after touching the day's high of 6,221.50. Also, SX40 index, the flagship index of MCX-SX, closed 52.78 points down at 12,338.18.
Brokers said trading sentiment remained subdued for the major part of the session as cautious participants indulged in trimming their positions ahead of quarterly earnings season, beginning later this week.
"Stock specific action will be guided by upcoming quarterly result expectation and actual results," said Milan Bavishi, Head Research, Inventure Growth and Securities.
Mixed global cues also affected domestic sentiment.
Among sectoral indices, the BSE Metal sector suffered the most by losing 1.68 per cent, followed by Realty index (1.65 per cent), Oil & Gas index (1.37 per cent) and IT index (1.29 per cent).
* BSE index falls 0.45 pct; NSE ends 0.47 pct lower
* FIIs unwind long positions in index futures for second day
* Critical support for India's NSE index seen at 6,100
BSE Sensex falls 94 points, Infosys, Reliance Industries, Tata Steel share prices
(Reuters) Indian shares fell for a fifth consecutive session on Tuesday to mark their weakest start to a year since 2011, as technology stocks, including Infosys Ltd, dropped on caution ahead of the software exporter's quarterly results on Friday.
Concerns that foreign investors are becoming more selective are also weighing on sentiment, after their $20 billion worth of net purchases last year helped boost domestic shares.
Foreign institutional investors (FIIs) sold 10.04 billion rupees ($161 million) worth of index futures and 3.33 billion rupees worth of cash shares over the previous two sessions. However, they still remain net buyers of 7.37 billion rupees of cash shares so far this year.
Losses also tracked Asian shares that fell to a near four-month low on Tuesday on disappointing U.S. services sector data that raised concerns about stuttering growth in the world's largest economy.
Markets are expected to remain range-bound ahead of Infosys Ltd's third quarter earnings, informally kicking off the results season, and key inflation data next week.
"The Sensex (India's BSE benchmark index) would remain in a range of 500-600 points for the time being as fiscal problems remain a drag, even as inflation data may surprise positively," said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.
The benchmark BSE index fell 0.45 percent, or 94.06 points, to end at 20,693.24, marking its lowest close since Dec. 17. The index has fallen 2.2 percent this year, registering a loss in each of the five trading sessions so far. That would make it the weakest start since a 4 percent fall over the first five sessions of 2011.
The broader NSE index lost 0.47 percent, or 29.20 points, to end at 6,162.25, approaching 6,100 which has been a key technical support five times since January 2013. Technology shares fall on caution ahead of Infosys earnings. Infosys fell 1.7 percent, Tata Consultancy Services Ltd ended down 1.5 percent, while Wipro Ltd lost 1.4 percent.
Among shares of other blue chips, Axis Bank Ltd fell 1.8 percent, while Tata Motors Ltd ended lower 0.5 percent. Power producers slumped for a second day on media reports that the state government in Maharashtra, home to Mumbai, was planning to cut power tariffs.
Tata Power Co Ltd fell 2.8 percent, adding to a 2.6 percent decline in the previous session, while Reliance Infrastructure Ltd ended lower 1.7 percent. It fell 0.5 percent on Monday.
Among the gainers, tyremakers rose on expectations of higher margins as the key Tokyo Commodity Exchange rubber contract <JRUc6 0#2JRU:> hit a five-week low on Tuesday, weighed down in part by weak Chinese services sector data. Apollo Tyres Ltd rose 0.4 percent, Ceat Ltd gained 0.3 percent and Goodyear India Ltd advanced 0.8 percent.
ICICI Bank Ltd also gained 0.9 percent on value-buying after falling nearly 5.3 percent over the previous four sessions, dealers said.
FACTORS TO WATCH
* Dollar rebounds, gains limited by weak U.S. data
* Brent rebounds above $107 as Libya conflict escalates
* Asian shares falter to near 4-month low
* Foreign institutional investor flows