The Indian rupee also depreciated against US dollar to 61.41 intra-day from Monday's close of 61.10.
The 30-share BSE Sensex today opened in positive terrain at 26,537.42. It improved further to touch the day's high of 26,550.79 tracking earnings by Reliance Industries and easing retail inflation, released yesterday after trading hours.
Selling in realty, consumer durables, IT, oil & gas, auto, teck, FMCG and capital goods, dragged down the Sensex into negative zone.
Around noon, data showed wholesale inflation in September dropped to nearly five-year low of 2.38 percent. The Sensex finally settled down by 34.74 points, or 0.13 percent, at 26,349.33. Intra-day, it had dipped to 26,212.01.
"It was a volatile and range-bound session ahead of the Assembly elections in Maharashtra and Haryana. While markets are closed tomorrow on the account of the Assembly elections in Maharashtra, exit polls after the voting could lead to volatile trading on Thursday," said a note from HBJ Capital.
Maharashtra and Haryana together account for 19 and 5 seats respectively in the Rajya Sabha, so a good performance by the BJP in these state elections will consolidate the party's post in the upper house, brokers said.
Shares of DLF tanked nearly 28 percent -- in one of its worst falls -- after Sebi imposed a three-year ban on the company and some top executives from markets.
Overall, 14 Sensex stocks declined led by HDFC, HDFC Bank, ONGC, Tata Motors, Tata Steel, TCS and Wipro while 16 led by BHEL, Axis Bank, SBI, Bajaj Auto and HUL rose.
The 50-issue NSE Nifty settled 20.25 points, or 0.26 percent, down at 7,864.00 after shuttling between 7,928 and7,825.45 on alternate bouts of buying and selling.
Globally, Asian markets retreated and European stocks slumped to eight-month low on economic woes.
Meanwhile, the provisional data released by the local stock exchanges showed that Foreign Portfolio Investors (FPIs) sold shares worth a net Rs 671.06 crore yesterday.
Sectorwise, the BSE Realty index suffered the most by losing 9.24 percent, followed by IT (down 0.77 percent), Consumer Durables (0.63 percent), Oil & Gas (0.54 percent) and Auto (0.43 percent). On the other hand, Power, Banking, PSU, Metal and Healthcare ended higher.

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