Key Points

The Sensex dropped 872.98 points, or 1.06 per cent, to close at 81,186.44. During the day, the index moved between an intra-day high of 82,250.42 and low of 81,153.70.

Similarly, the Nifty slipped 261.55 points, or 1.05 per cent, to settle at 24,683.90.

"The Nifty slipped after two days of consolidation, dragged down by broad-based selling and weakening market breadth,” Rupak De of LKP Securities said.

“Despite this decline, the short-term trend remains strong, although there is a possibility of a deeper pullback toward the 21-day EMA on the daily timeframe,” he added.

Most of the Sensex stocks ended lower. Only Tata Steel, Infosys, and ITC managed to post gains.

Tata Steel rose 0.73 per cent, Infosys added 0.08 per cent, and ITC was marginally up by 0.07 per cent.

On the other hand, top losers included Eternal (formerly Zomato), which fell 4.10 per cent, followed by Maruti Suzuki, UltraTech Cement, Power Grid, and Nestle India.

Broader markets also saw selling pressure. The Nifty Midcap100 index dropped 1.62 per cent, and the Nifty Smallcap100 index slipped 0.94 per cent.

Sector-wise, all indices closed lower. The auto sector was the worst performer of the day. The Nifty Auto index tumbled 2.17 per cent, dragging the overall market sentiment further down.

The India VIX, also known as the fear index, inched up by 0.12 per cent to 17.39 -- indicating rising concerns about market volatility.

"With the lack of major positive triggers and prevailing uncertainty over US fiscal stability, investors opted for profit-booking and adopted a cautious stance,” said Vinod Nair of Geojit Investments Limited.

He added that the selling pressure was widespread as participants awaited more clarity on the India-US trade agreement.

“Given the current premium valuations and delays in the trade deal, we foresee a phase of short-term consolidation, which may lead FIIs to scale back their positions in the domestic market," Nair mentioned.

- IANS