However, value-buying in several heavyweights towards the fag-end trimmed the losses, with the index finishing at 32,802.44, down 67.28 points or 0.20%.
According to market observers, investors traded with caution ahead of the outcome of the Reserve Bank of India's (RBI) two-day policy review meet on Wednesday.
The gauge had tanked 891.50 points in the previous four sessions as upbeat second quarter GDP numbers failed to dispel concerns over a widening fiscal deficit.
At 12.30 PM: Sensex slumped 111 points or 0.34% to 32,690.59 while the wider Nifty was down by over 47 points or 0.47% to 10,070.50. The broader Nifty was trading below the key 10,100-level, down by 33.30 points or 0.33 per cent at 10,084.95. At 10:38 AM, Sensex was down by 81.62 points to trade at 32,720.82 while Nifty fell 32.00 points to 10,086.25. The central bank is widely expected to keep policy rates unchanged tomorrow and will stay focused on controlling inflation, experts said.
Asian stocks slipped on Wednesday, pressured by losses on Wall Street as the technology sector stuttered yet again after a brief rebound, while the dollar sagged on lower long-term U.S. yields.
Provisional data with the exchanges showed that foreign institutional investors sold scrips worth Rs 1,470.56 crore while domestic institutional investors bought stocks worth Rs 1,074.39 crore.
The broader market depicted a mixed trend, with the BSE mid-cap ending up 0.41 per cent, while small-cap index finished 0.03 per cent down.
On the other hand, the S&P BSE banking index surged by 108.78 points, oil and gas index was up 24.91 points and energy index by 23.70 points.
Public sector banks were the most hit after RBI's policy as Nifty PSU bank index was tradin at 3,762.40 down 70 points or 1.82%.
Major losers were Tata Steel 1.70 per cent, SBI 1.21 per cent, Bajaj Auto 0.94 per cent, ITC 0.83 per cent and HDFC 0.70 per cent.