The benchmark Sensex slumped 156 points to end at 35,387.88 on Wednesday amid the uncertainty over government formation in Karnataka, where no single party got the majority.
Apart from that, weak global trends and overnight losses at the Wall Street after North Korea called off talks with South Korea and threatened to cancel the summit with Donald Trump subdued the investors' faith.
Brokers said investor sentiment was subdued following the uncertainty over government formation in Karnataka, which gave a fractured mandate on Tuesday.
The 30-share Sensex opened lower at 35,452.35 points and moved between 35,241.63 and 35,543.89 before settling lower by 156.06 points, or 0.44 per cent, at 35,387.88.
Earlier on Tuesday, the market zoomed over 400 points intra-day after the BJP appeared crossing the simple majority mark in Karnataka, according to the trends.
However, it gave up all the gains to end slightly lower after the Congress unexpectedly joined hand with the JD(S) in a bid to keep the BJP out of power and staked claim to form the government.
The 50-share NSE Nifty too stayed in the red through the session and finally settled 60.75 points, or 0.56 per cent down at 10,741.10. Intra-day, it moved between 10,699.70 and 10,790.45.
(With inputs from agencies)