The 50-share NSE Nifty fell as much as 38.95 points, or 0.35 per cent, to hit 11,010.70.
Sentiment turned cautious as investors preferred to reduce their positions ahead of the Union Budget to be presented on Thursday.
Foreign funds sold shares worth Rs 105.56 crore, while domestic institutional investors offloaded equities worth Rs 281.65 crore yesterday, provisional data showed.
In the Asian region, Japan's Nikkei was down 0.11 per cent, Shanghai Composite Index shed 0.10 per cent, while Hong Kong's Hang Seng fell 0.03 per cent in early deals.
The US Dow Jones Industrial Average ended sharply lower by 1.37 per cent yesterday.
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