The Nifty 50 index slipped 0.37% to 19,672.35, while the S&P BSE Sensex closed 0.45% lower to 66,384.78.
Nine of the 13 major sectoral indexes logged losses, with fast-moving consumer goods index sliding 1.72%. ITC fell 3.89% and led the losses in FMCG and Nifty 50 indexes after approving the demerger of its hotels business.
“We believe the markets could correct another 4% in the very short term,” said G Chokkalingam, managing director for research at Equinomics Research Pvt Ltd.
“Such a correction would be good for the markets after the recent rally from an overall valuation and liquidity point of view.”
The Nifty 50 has risen for five months in a row since March, adding 13.69% over the period and scaling fresh record highs before witnessing a slide over the last two sessions.
Reliance fell 2.02% after posting a bigger-than-expected drop in quarterly profit on weakness in its flagship oil-to-chemicals (O2C) business.
“After the recent run-up in Reliance Industries ahead of the Jio Financial Services demerger, near-term upside is limited,” said Anil Sharma and Aditya Bansal, analysts at Kotak Institutional Equities.
Reliance rose 9.57% between July 8, when it announced the record date for the demerger of its financial services business, and July 20, the day when the demerger became effective. The stock has fallen 5.05% over the last two sessions.
Private lender Kotak Mahindra Bank lost 3.7% despite reporting a larger-than-expected rise in June-quarter profit. The stock had gained over 3.5% in the last three sessions.
Asian and European equities were also subdued ahead of the U.S. Federal Reserve and European Central Bank monetary policy meetings, due later this week.