Fears of a below normal monsoon and profit booking following four sessions of consecutive gains on Wednesday pulled the key equity indices lower. Nifty, which hit an all-time high by a small margin, also slid significantly towards the close.
The global market, however, stayed positive due to signs of pick up in the Chinese economy and the prospects of a US-China trade deal.
The Sensex closed 179.53 points or 0.46 per cent lower at 38,877.12, while the Nifty declined by 69.25 points or 0.59 per cent at 11,643.95.
A day after the benchmark Sensex surpassed the 39,000-mark to hit an-all time high, the Nifty index touched a record high of 11,761 during the early trade session on Wednesday.
"Nifty touched a new all-time high by a very narrow margin of 0.8 Nifty points. Selling pressure emerged after a private weather forecaster predicted that there will be below normal monsoon rains this year," said Deepak Jasani of HDFC Securities.
Skymet Weather on Wednesday predicted that monsoon rains will be below normal this year.
"The market slid after touching a new high as initial forecast of below normal monsoon by Skymet and rise in oil prices impacted the sentiments. Investors are likely to be more vigilant going forward due to the polls and have a bottom-up-approach considering the performance of fourth quarter results," said Vinod Nair, Head of Research, Geojit Financial Services.
Jet Airways fell steeply after it said that an additional 15 aircraft have been grounded due to non-payment of amounts outstanding to lessors.
Other major contributors in the Sensex decline were State Bank of India, down 2.40 per cent, followed by Yes Bank, Larsen and Toubro, Bharti Airtel and Tata Motors (DVR).
Maruti Suzuki, HCL Technology, HDFC, Tata Steel and Hero Moto Corp were the gainer on the Sensex, settling up to 3 per cent up.