The two-day rising trend on the bourses ended after investors unwound their positions in stock futures prematurely.
And profit-taking early on triggered sales in technology counters. However, select defensive stocks managed to attract buying interest.
Dealers said unwinding of stock futures positions ahead of expiry spurred the selloff in technology stocks.
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The August stock futures contract expires on Thursday and investors either roll over or square off their positions, which leads to fluctuations in the cash market.
The 30-stock Sensex settled down 25.75 points at 3,097.85, after touching an intra-day high of 3,142.52, while S&P CNX Nifty lost 11.15 points to end at 987.70.
Despite correction, brokers said, the undertone of the market was likely to remain optimistic with the government's commitment to find a solution to the troubles of the Unit Trust of India.
Technology major Infosys Technologies shed 1.59 per cent to end at Rs 3,422, off from its intra-day high of Rs 3,553. While HCL Technologies lost 6.23 per cent to close at Rs 188.90, Satyam Computer settled down 2.73 per cent at Rs 219.15. Media major Zee Telefilms declined by 2.94 per cent to Rs 103.95, off the day's high of Rs 108.50.
FMCG stocks, however, bucked the general sentiment. Colgate Palmolive advanced 1.86 per cent to Rs 137 selective fund-based buying.
Other key stocks in the segment, Nestle India (up 1.18 per cent to Rs 554.75), ITC (up 0.22 per cent to Rs 676.40), and Hindustan Lever (up 0.08 per cent to Rs 181.40), also settled in positive zone.
Even pharma segment witnessed a mild rally. GlaxoSmithKline (up 1.06 per cent to Rs 375), Cipla (up 0.81 per cent to Rs 927.50), and Dr Reddy's Labs (up 0.02 per cent to Rs 869.05) ended higher.
Engineering major Larsen & Toubro recovered from the day's low of Rs 181.15 on selective buying, spurred by talks that Unit Trust of India was close to selling its 10.71 per cent stake in the company to any interested party, which is willing to pay a higher premium. The stock settled up 0.62 per cent at Rs 186.
Other cement stocks such as ACC (down 0.89 per cent to Rs 138.90), Gujarat Ambuja Cements (down 0.61 per cent to Rs 163.75), and Grasim (down 0.13 per cent to Rs 315.75) waned amid fears that oversupply and lower demand may pull down cement prices in some key markets.