Stocks dropped for a second day in a volatile trading session before the expiry of the monthly derivatives contracts and the start of the winter session of Parliament on Thursday.
The Sensex lost 0.2 per cent to 25,775.74 at the close in Mumbai, after changing direction at least 20 times. The gauge has slid 3.3 per cent this month after Prime Minister Narendra Modi's Bharatiya Janata Party lost a state election.
Lawmakers regroup for the winter session Thursday, the same day that the derivatives contracts lapse. Markets are closed Wednesday for a public holiday.
Hindustan Unilever, the biggest home-old products maker, and Housing Development Finance Corp, the largest mortgage lender, were the best performers on the S&P BSE Sensex. Maruti Suzuki India retreated the most in a week, while and Infosys, the second-largest software exporter, ended a three-day advance.
"The GST and the bankruptcy law bills are important," said Vaibhav Sanghavi, managing director at Ambit Investment Advisors Pvt in Mumbai. "If these go through, it will be a good catalyst for the economy and the markets." Sanghavi said he is bullish on auto and paint makers, and financials and industrial companies.
The government has proposed a set of bankruptcy rules, scrapping laws that date back a century, to help cut the time it takes to wind up a dying company and reclaim dues.
Hindustan Unilever surged 2.6 per cent to its highest since October 28. Housing Development Finance climbed 2.3 per cent to its highest since November 4. Maruti Suzuki tumbled two per cent, paring this year's rally to 39 per cent. That's still the best performance among the 30 Sensex companies. Infosys lost 1.2 per cent, ending a three-day, 3.3 per cent climb.
International investors were net sellers of Indian stocks for an ninth straight day on November 23, the longest series of outflows since September. They've sold $672 million of shares this month, the most among eight Asian countries tracked by Bloomberg, after South Korea.
"The volatility in currencies and commodities is impacting risk-money," leading to outflows, Sanghavi said. The price swings will "give investors better entry points" to add to their equity holdings, he said.
The Sensex has fallen 6.3 per cent this year and trades at 15.2 times projected 12-month earnings. The MSCI Emerging Markets Index is valued at a multiple of 11.2.