The rupee, which weakened for the the third day against the dollar, also had its bearing on domestic equities.

The 30-share index was 337.49 points or 1.31 percent lower at 25,435.04 in early trade with all sectoral indices led by metal, auto, PSU and realty, trading in the negative zone, plunging up to 1.07 per cent.

The gauge had rallied by 544.03 points in the past two trading sessions.     

Brokers said sentiment dampened after India yesterday signed with Mauritius an amendment to the pact to get rights to tax capital gains on shares of Indian company sold after April 1, 2017, triggering fresh spell of selling by participants.

With the signing of the amendment to the Double Taxation Avoidance Convention (DTAC) with Mauritius, sale of shares of an Indian resident company will be taxed at 50 per cent of the applicable rate between April 1, 2017, to March 31, 2019.

Full capital gains tax will apply from April 1, 2019. The National Stock Exchange Nifty again broke below the 7,800-mark, falling 106.90 points or 1.35 per cent to 7,780.90.

Laggards from the Sensex kitty included Bharti Airtel, Dr Reddy's, Tata Motors, Coal India, BHEL, Adani Ports, HDFC Ltd, ICICI Bank, GAIL, HDFC Bank, SBI and M&M.

On the other hand, trend at other Asian markets was firm, tracking overnight gains at the US markets. Japan's Nikkei was up 0.29 percent, China's Shanghai Composite Index rallied by 0.12 percent, while Hong Kong's Hang Seng index shed 0.60 percent in morning trade today.

The US Dow Jones Industrial Average ended 1.26 percent higher in yesterday's trade.

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