After trading on a volatile note, the 30-share BSE index settled 205.10 points, or 0.49 per cent, lower at 41,323.81.
Likewise, the broader NSE Nifty fell 54.70 points, or 0.45 per cent, to 12,169.85.
Tata Steel was the top loser in the Sensex pack, shedding 3.01 per cent, followed by M&M, Maruti, Asian Paints, PowerGrid, ITC and Axis Bank.
On the other hand, Ultratech Cement, HDFC, Kotak Bank, ONGC and TCS ended with gains.
According to traders, domestic investors turned wary amid subdued quarterly results by key index constituents and negative cues from global markets.
Further, market sentiment was hit after the IMF on Monday lowered India's economic growth estimate for the current fiscal to 4.8 per cent and listed the country's much lower-than-expected GDP numbers as the single biggest drag on its global growth forecast for two years.
Bourses in Shanghai, Hong Kong, Tokyo and Seoul ended with sharp losses.
European markets were also trading on a negative note in their early sessions.
Brent crude oil futures fell 1.21 per cent to USD 64.41 per barrel.
The rupee depreciated 5 paise to 71.16 per US dollar (intra-day). ANS ABM ABM