The Sensex ended the day with loss of 54 points, while the Nifty fell 2 points in trade. Action shifted from index stocks to mid cap stocks with Adani group stocks rallying on hopes of a Narendra Modi led government.
PSU banking stocks were the clear winners after reports by an RBI panel suggested that the government should cut its stake in PSU banks.
All of the PSU banking stocks rallied with notable winners being Bank of Baroda, Union Bank of India, Canara Bank, IOB and Bank of India.
Tech stocks once again had a mixed day in trade with HCL Tech and Infosys among the losers, while TCS ended the day higher.
SKS Micro Finance was among the gainers after reports that Akula may sell his stake in the company. Shares in Hindustan Construction Company (HCC) jumped 7 per cent, as investors shifted attention to smaller construction companies.
Top Nifty losers which dragged the markets lower were heavy weight Reliance Industries, Mahindra and Mahindra, HDFC and HDFC Bank.
Metal stocks had a fantastic run in trade with Jindal Steel and Tata Steel among the winners. Dr Reddy's was down three per cent in trade after select brokerages downgraded the stock after results fell short of expectations.
Meanwhile, European markets were trading marginally lower with UK's FTSE, German DAX and the French CAC all seeing selling pressure.