Investor sentiment was also hampered due to a spike in the crude oil prices, along with heavy outflows of foreign funds.
"For the days ahead, one should be cautious of government's stance related to the CRPF attack," said Debabrata Bhattacharjee of CapitalAim.
According to other market observers, negative global cues and a weak rupee dented investor sentiment. However, a sharp recovery in the afternoon session helped curb the losses.
"Market slid due to broad-based selling across sectors and a weak rupee cast cloud over investor's sentiment. Volatility may continue due to lack of positive triggers in the domestic market, while rising oil prices will impact domestic macros in the near term," said Vinod Nair, Head of Research, Geojit Financial Services.
"Global markets turned negative due to obstacles in the US-China trade deal," he added.
The BSE Sensex closed at 35,808.95, lower 67.27 points or 0.19 per cent than the previous close of 35,876.22 points.
It had opened at 35,985.68 points and touched an intra-day high of 36,022.57 and a low of 35,510.97 points.
The Nifty50 on the National Stock Exchange settled 21.65 points or 0.53 per cent lower at 10,724.40 points.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)