The Nifty too closed lower by 80.75 points, or 0.73 per cent, at 11,049.65 after hitting a low of 11,033.90.
The benchmark BSESensex was down 50 points or 0.15 percent at 35,981 in early trade while the broader Nifty index was down about 0.1 percent at 11,039. Foreign funds sold shares worth Rs 105.56 crore, while domestic institutional investors offloaded equities worth Rs 281.65 crore on Tuesday, provisional data showed.
Jubilant Life Sciences rallied over 3% to Rs 962, extending its 3% gain of the last two days on BSE, after the company announced that it has received Abbreviated New Drug Application (ANDA) approval for Clonidine Hydrochloride Extended-Release Tablets.
On the other hand, the S&P BSE banking index edged higher by 124.79 points, oil and gas index by 77.60 points and energy index by 25.97 points.
Vinod Nair, Head of Research, Geojit Financial Services, said: "Selling extended in the market as investors were awaiting the big budget day while the expectation for this budget is muted compared to what was anticipated over the last 2-years". Some tinkering can be expected on corporate and individual taxation.
Shares of Bharti Infratel, Kotak Bank, Tech Mahindra, BPCL, HPCL and Reliance Industries, were the top gainers.
Meanwhile, drug major Dr Reddy's emerged as the worst performer among Sensex constituents by plunging 3.75 per cent, followed by Tata Steel at 3.49 per cent.