Mumbai: The Sensex Tuesday surrendered initial gains to close nearly 136 points lower at three-week low of 18,577.70 on fag-end selling in Reliance Industries, L&T and Tata Motors, amid speculation of a Cabinet reshuffle.
After opening higher, the index touched day's high of 18,801.10 but the BSE benchmark index started trimming gains as investors sold positions in auto stocks.
Meanwhile, Prime Minister Manmohan Singh met President Pranab Mukherjee, triggering fresh speculation of a Cabinet reshuffle. The meeting lasted one hour, official sources said.
Brokers said investors, confused over the on-going political chaos, decided to book profits and play safe ahead of the expiry of derivatives contract on October 25.
RIL also gave up initial gains and closed 1.21 percent down as selling pressure intensified.
Dealers said a positive opening in European indices also failed to enthuse the domestic market sentiment and the 30-share Sensex ended the session down 135.85 points, or 0.73 percent, at 18,577.70, a level last seen on September 27.
As many as 23 stocks reported losses led by Mahindra & Mahindra (3.66 percent), Tata Motors (2.62 percent) and Tata Steel (2.45 percent). SBI, Infosys and ITC also ended lower.
Brokers said sentiment dampened as investors also focussed on RIL reporting fourth straight quarterly drop in profit.
Auto scrips fell on lower-than-expected sales, while metal stocks were hit on fears of slowdown in China hitting demand.
In all, 11 out of 13 sectoral indices closed lower. The market breadth was negative as 1,712 stocks ended with losses while 1,179 shares closed with gains.
The falling trend was to some extent capped on firming trend in Asia and Europe after US retail sales beat estimates, improving outlook for Indian exporters, they added.
Likewise, the 50-share National Stock Exchange index Nifty fell by 39.25 points, or 0.69 percent, to 5,648.
Asian shares ended up today after better-than-expected US retail sales data and some strong earnings.
Key indices in China, Hong Kong, Japan, Singapore, South Korea and Taiwan ended higher between 0.01-1.44 percent. Yesterday, the Down Jones Industrial Average and the Nasdaq Composite Index ended up by 0.71 percent and 0.65 percent respectively.
European stocks also were quoting higher in the afternoon trade after reports that Spain was moving close towards making a formal bailout request.
The CAC was up by 0.38 percent, the DAX by 0.52 percent and the FTSE by 0.49 percent.
Back home, besides RIL, major losers from the Sensex pack were M&M (3.66 percent), Tata Motors (2.62 percent), Tata Steel (2.45 percent), Hindalco (2.38 percent), Sterlite Ind (2.26 percent), Jindal Steel (2.07 percent), BHEL (1.93 percent), Tata Power (1.84 percent), L&T (1.72 percent), Cipla (1.58 percent), SBI (1.56 percent), ICICI Bank (1.05 percent) and Coal India (0.80 percent).
Among seven gainers in Sensex, Maruti Suzuki rose by 2.13 percent, Hero Motocorp (1.70 percent) and Bharti Airtel (1.65 percent).
"The current phase of consolidation in Indian and global equities might continue as investors digest quarterly corporate earnings. In addition, FII flows also seem to be varying after constant pumping in of money in India on the back of reforms," said Amar Ambani, Head of Research, IIFL.
Among sectoral indices, the BSE-Realty dropped by 3.05 percent, followed by the BSE-Metal (1.89 percent), the BSE-Capital Goods (1.51 percent), the BSE-Power (1.32 percent), BSE-PSU (0.93 percent).
The total turnover at BSE rose to Rs 2,936.31 crore from Rs 1,830.52 crore yesterday.
Meanwhile, FIIs slowed down their purchases as they picked up shares worth Rs 20.16 crore on Monday as per provisional data with stock exchanges.