The NSE Nifty 50 index fell 0.8% at 18,266.60, while the S&P BSE Sensex dropped 0.7% at 61,259.96. The Nifty and the Sensex have risen more than 3% and 4%, respectively, in the past week.
"This is a sort of profit-booking, which the market was waiting for. The 1,000-point rally to 18,000 level was touched within a short period. Valuations are on the higher end too," said Likhita Chepa, senior research analyst at Capitalvia Global Research.
UBS analysts said in a note that Indian equities looked unattractive, especially on expensive valuations and fading earnings momentum.
Nifty metals and energy stocks were among the big losers, falling 2.1% and 1.6%, respectively. Hindalco Industries was the top loser on the Nifty 50 index, falling 3.9%.
Industrial metals and oil prices declined on Wednesday, following a recent strong rally, after the Chinese government stepped up efforts to tame record high coal prices and ensure coal mines operate at full capacity. [MET/L]
Investors are also awaiting more September-quarter earnings from Indian corporates, analysts said.
Consumer giant Hindustan Unilever dropped 2.7% after it warned that margins could remain under pressure in the near term due to elevated commodity prices.
Chemical producer Navin Fluorine slumped 9.3% and agriculture input maker Rallis India fell 7.1%, as both companies posted a quarterly profit drop.
(Reporting by Nallur Sethuraman in Bengaluru; Editing by Ramakrishnan M.)
By Sethuraman N R