The BSE Sensex fell 0.79 percent on Thursday as concerns of a rollback of major economic reforms due to political pressure on the government hit banking and retail stocks.
The 30-share benchmark index ended 146.76 points lower at 18349.25 with 19 of its components closing in the red.
The broader 50-share National Stock Exchange (NSE) Nifty index ended 0.82 percent or 45.80 points lower at 5554.25 on Thursday.
The pullout of Trinamool Congress (TMC) from the Congress-led United Progressive Alliance (UPA) coalition government cast fears that big ticket reforms announced in a bid to revive India's economy could be scrapped.
Gold and silver prices meanwhile climbed on account of festive buying as standard gold rose by Rs 160 to close at Rs 31,960 per 10 gm while silver ready rose Rs 390 per kg to end at Rs 63,050.