After reaching to a record high in opening trade on Tuesday, the Sensex was down 87.81 points at 33,643.38 and the Nifty declined 30.60 points to 10,421.20.
In early trade, both the key indices, Sensex and Nifty touched highest as Asian shares wre at peak in a decade. Asian shares rallied to their highest in a decade on Tuesday, while oil prices gave up some of their gains having previously surged to a more than two-year peak on an anti-corruption purge by Saudi Arabia's crown prince.
MSCI's broadest index of Asia-Pacific shares outside Japan extended early gains, rising 0.8 percent to its loftiest peak since November 2007. The index got a bump higher after all three major U.S. equity indexes closed at record highs overnight.
Japan's Nikkei reversed early losses and jumped 1.1 percent to nearly 26-year highs.
Among BSE sectoral indices, IT index gained the most by 1.24 per cent, followed by TECk 0.84 per cent and capital goods 0.02 per cent. While, oil & gas index dropped 1.48 per cent, followed by realty 1.47 per cent, consumer durables 1.23 per cent and PSU 1.03 per cent.
The top five gainers were Infosys, TCS, Kotak Bank, Wipro and NTPC, while the major losers were Reliance, ICICI, Adani Ports, Asian Paints and State Bank of India.
Meanwhile, the dollar index, which tracks the greenback against a basket of six major currencies, was nearly flat on the day at 94.735.
The dollar added 0.2 percent against the yen to 113.89 but remained well below its eight-month high of 114.737 marked in the previous session.
The euro was steady on the day at $1.1613.
The lack of clarity on the progress of U.S. tax reform as well as leadership at the U.S. central bank clouded the dollar's outlook.
Tax negotiators in the U.S. House of Representatives will seek to overcome their differences this week and work on a plan, aiming for their self-imposed deadline of passage this month.
The Federal Reserve confirmed on Monday that influential monetary policymaker William Dudley plans to retire by mid-2018, leaving the leadership of the U.S. central bank unusually open.
Lower U.S. yields also weighed on the dollar, with the benchmark 10-year yield at 2.325 percent in Asian trading compared to 2.320 percent, its U.S. close on Monday, when it plumbed its lowest levels in two weeks. It was at a seven-month high of 2.47 percent as recently as late October.
(With inputs from PTI)
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