Twenty eight out of 50 Nifty stocks closed in the negative zone. Top laggards on the Nifty were Indiabulls Housing Finance, Adani Ports, Bajaj Auto, Kotak Mahindra Bank and Bharti Infratel, settling between 2.49 and 4.81 per cent lower.

Settling between 2.81 and 6.21 per cent higher, ICICI Bank, Tata Steel, Axis Bank, Hindalco and HCL Tech were the major advancers on the Nifty.

Sector wise, the NSE FMCG, realty and pharma indices settled up to 0.99 per cent lower while metal and banking stocks closed by up to 1.9 per cent.

Dewan Housing Finance Corp, which slumped nearly 10 per cent following reports of an alleged financial misappropriation by its controlling shareholders, closed 5.48 per cent lower on the NSE.

Shares of Housing Development Finance Corp Ltd (HDFC) closed 2.26 per cent lower on NSE after posting a 60 per cent plunge in net profit.

However, the losses were curbed by strong gains in private-sector lenders Axis Bank Ltd and ICICI Bank Ltd, which closed up 4.58 percent and 6.21 percent, respectively on the NSE. ICICI Bank is scheduled to report its quarterly results later in the day.

According to Viral Berawala, CIO, Essel Mutual Fund, markets were slightly negative with private banks supporting the market after an excellent December quarterly results with reduced NPA's and high growth. "Metal stocks rallied on back of expected iron ore supply cuts," he added.

Domestic investors turned cautious ahead of futures and options expiry of January series contracts and the upcoming interim budget, to be held on Friday, experts were quoted as saying in news agency Press Trust of India (PTI) report.

Global investor sentiment was mixed as American and Chinese negotiators started two days of high-level talks aimed at settling a six-month trade war that has weakened both sides, shaken financial markets and clouded the outlook for the global economy, experts said. Market is also awaiting the outcome of the US Federal Reserve's meeting later in the day, they added.