The broader NSE Nifty too cracked below the 7,900-level. Caution ahead of the expiry of December monthly derivatives contracts on Thursday weighed, traders said. Sentiment took a hit after IMF chief Christine Lagarde wrote in a guest article in a German newspaper that global growth will be "disappointing and patchy" in 2016.

She pointed to the prospects of US Fed rate hike and slowdown in China as fuelling uncertainty and risk of global volatility. The BSE index, earlier backed up by covering-up of short positions, succumbed to profit-booking and ended below the 26,000-level at 25,960.03, down 119.45 points, or 0.46 percent. It had gained 240.77 points in the previous two sessions.

The NSE Nifty closed lower by 32.70 points, or 0.41 percent, at 7,896.25. It touched the day's high of 7,944.75 in early trade.

"Early gains were frittered away as traders indulged in year-end profit-booking in the stocks across the board," said Manoj Choraria, a Delhi-based stock broker. A mixed trend in Asia, and European shares slipping from their three-week highs in early trade only compounded the woes.

The bear grip was so tight that as many as 21 stocks out of the 30 in the Sensex pack lost while others advanced. Infosys was the worst hit as it plunged 1.52 percent, followed by TCS (1.38 percent) and Wipro (1.04 percent).

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