Mumbai, Feb 5 (PTI) Taking a breather after recent rally, stock markets closed lower on Wednesday as investors turned cautious ahead of the RBI's monetary policy decision later this week and trade war concerns.

The 30-share BSE Sensex declined 312.53 points or 0.40 per cent to settle at 78,271.28 with 21 of constituents closing down and nine with gains. During the day, it went lower by 367.56 points or 0.46 per cent to 78,216.25.

The NSE Nifty dropped 42.95 points or 0.18 per cent to 23,696.30. The index moved between a high of 23,807.30 and a low of 23,680.45 during the day.

Profit-taking after Tuesday’s rally and the rupee plunging to record low levels also hit market sentiment. Sensex had jumped 1,397.07 points and Nifty soared 378.20 points to settle at one-month highs on Tuesday following firm global trends.

From the 30-share Sensex pack, Asian Paints dropped over 3 per cent after the firm reported a 23.5 per cent decline in consolidated net profit at Rs 1,128.43 crore for the third quarter ended December 2024 amid downtrading due to muted demand and weak festive season.

Titan, Nestle, Hindustan Unilever, State Bank of India, Larsen & Toubro, ITC, Zomato and Bajaj Finserv were also among the laggards.

Adani Ports, IndusInd Bank, Tata Motors and HDFC Bank were among the major gainers.

"Markets mirrored weak global cues and ended lower amid selling in select banking, auto, realty and FMCG stocks. While all eyes will be on Friday's monetary policy announcement, intra-day volatility could intensify over next few sessions," Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said.

"The domestic market traded within a narrow range in negative terrain. Investors are weighing the improved domestic outlook, buoyed by a favourable budget, against lingering global uncertainties stemming from the tariff war. While declining US bond yields and lower crude oil prices have supported market sentiment, the rupee's depreciation could offset these gains," Vinod Nair, Head of Research, Geojit Financial Services, said.

The BSE smallcap gauge jumped 1.42 per cent and midcap index climbed 0.69 per cent.

Among BSE sectoral indices, realty declined 1.66 per cent, FMCG (1.42 per cent), consumer durables (1.21 per cent), consumer discretionary (0.43 per cent) and auto (0.14 per cent).

Oil & Gas jumped 1.89 per cent, services (1.59 per cent), metal (1.55 per cent), energy (1.30 per cent) and healthcare (1.21 per cent).

The Reserve Bank of India (RBI) on Wednesday started deliberations on the monetary policy and the decision will be announced on Friday (February 7).

India's services sector activity expanded at the slowest pace in over two years in January amid softer increases in sales and output, a monthly survey said on Wednesday.

The seasonally adjusted HSBC India Services PMI Business Activity Index fell from 59.3 in December to 56.5 in January -- its lowest level since November.

In the Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

In Asian markets, Seoul and Tokyo settled in the positive territory while Hong Kong ended lower.

European markets traded in the negative zone. US markets ended higher on Tuesday.

Foreign Institutional Investors (FIIs) turned buyers on Tuesday after unabated selling for the past many days. They bought equities worth Rs 809.23 crore, according to exchange data.

Global oil benchmark Brent crude declined 0.84 per cent to USD 75.56 a barrel. PTI SUM MR MR

Monetary policy uncertainty weighs on markets, triggering selling in consumption stocks and raising volatility ahead of decision. Equity markets fell as investors awaited the Reserve Bank of India's monetary policy decision, with concentrated selling in consumption, banking, auto and realty stocks. Profit-taking after recent gains, rupee depreciation and global trade uncertainties weighed on sentiment, while lower crude and US bond yields offered some support. A notable decline in a major paint maker's quarterly profits and a slowdown in services-sector PMI further pressured consumption-linked stocks, and market participants warned of heightened intra-day volatility during the policy period.