Markets will be shut from Thursday until Monday for public holidays and re-open for trading on Tuesday.
Investors thus opted for caution, given lingering global risk factors such as the continued civil unrest in Hong Kong and rising worries about earlier-than-expected US rate hikes.
Adding to the caution, overseas investors sold stocks worth of Rs 486 crore on Tuesday, offloading shares in five out of past six sessions.
Foreign investors have been integral to Indian shares marking record highs on September 8 and any signs of selling tends to spark concerns.
July-September earnings reports would also be key for near-term direction. Infosys Ltd kicks off the earnings season with quarterly results on October 10.
"In the near term, geo-political tensions, economic growth in China and eurozone will take most of the attention of the market. Quarterly results will start pouring in a couple of weeks and will impact individual stocks," said Dipen Shah, head of private client group research at Kotak Securities.
The Sensex fell 0.23 per cent, or 62.52 points, to end at 26,567.99, also falling 0.22 per cent for the week.
The Nifty lost 0.24 per cent, or 19.25 points, to end at 7,945.55, while marking a weekly decline of 0.29 per cent.
Blue-chips led the declines. ITC fell 1.7 per cent, while Reliance Industries ended 2 per cent lower.
HDFC Bank fell 0.5 per cent and IndusInd Bank Ltd lost 3.2 per cent.
Non-banking financial companies (NBFCs) fell on worries the central bank may tighten norms for bad loans. The Reserve Bank of India on Tuesday said changes in the NBFC regulatory framework would be introduced by end of this month.
Shriram Transport Finance Co Ltd fell 2.4 per cent and Mahindra and Mahindra Financial Services ended down 0.6 per cent.
Maruti Suzuki India, India's largest carmaker by sales, fell 3 per cent after its exports fell by 28.2 per cent in September, surprising some investors.
However, two-wheeler maker Hero MotoCorp gained 1.3 per cent after its September sales rose by 30 per cent, beating some analysts' estimates.
Consumer discretionary shares were top gainers among BSE large-cap stocks. Traders said consumer good companies are seen as safer bets given the expected rise in disposable incomes.
Berger Paints India ended up 5.5 per cent, Bata India rose 5.1 per cent and pizza maker Jubilant Foodworks Ltd surged 3.9 per cent.
Also, software exporters gained on hopes weakness in currencies against US dollar would aid margins from overseas.
Tata Consultancy Services gained 1.4 per cent, while Infosys ended up 2.7 per cent.
Copyright: Thomson Reuters 2014