The benchmark BSE Sensex declined 0.04%, or 11.83 points, to 31,209.79, while the broader NSE shed 0.02%, or 1.70 points, to 9,613.30. Both the gauges had recorded their biggest gains in more than five-weeks in the previous session.
Cigarette and consumer goods maker ITC fell 1.5%, ending a four-session rally and coming off record highs hit Monday. Energy-to-telecom conglomerate Reliance Industries rose 2.8%, and state-run Oil & Natural Gas Corp. added 0.6% after crude oil prices chalked up their eighth consecutive day of gains on Monday.
Regional sentiment was cautious after North Korea launched a ballistic missile into the Sea of Japan, the latest in a series of tests conducted by the isolated nation in recent months. The missile flew 930 kilometers before landing in Japan's Exclusive Economic Zone, Reuters reported, citing the South Korean military and Japanese government. The Nikkei Asia300 Index was down 1.1%.
"Going further, we may see some range-bound movement. The markets, however, are in a structural bull run and any temporary pause will only give buying opportunity," said Akash Jain, vice president, equity research at Ajcon Global Services. "The earnings season and distribution of monsoon will impact markets."
Mahindra & Mahindra, India's top-selling utility vehicle and tractor maker, was down 0.7% after jumping 1.2% on Monday following upbeat commercial vehicle sales. The stock is up more than 14% so far this year as a normal monsoon season promises to boost demand for tractors.
Investors continue to assess the impact of the recently rolled out Goods and Services Tax. GST is India's biggest tax reform since independence, as one tax has replaced several other levies at the center and state level. This unified system of indirect taxes will support growth, according to Fitch ratings. "The GST is unlikely to increase revenue in the short term," Fitch said in a statement. "However, it is likely to boost revenue indirectly over the long term, as it supports GDP growth and encourages tax compliance."
Still, Fitch warned there could be some short-term risks involved in the GST implementation as it is poised to change the way businesses operate, affecting their financial reporting, tax accounting, supply-chain management and technology requirements.
On the Sensex, 20 of the 30 stocks ended lower, while overall issues advancing issues edged past declining ones 1,344 to 1,315, while 134 remained unchanged.
Hero MotoCorp fell 2%. The company is halting royalty payments to its former joint venture partner Honda, and plans to tap its research and development unit in Rajasthan for technology requirements, the Economic Times reported, citing vendors familiar with the plans.
Information technology major Wipro gained 0.3% in spite of an overnight slide on the Nasdaq Composite.
Tata Chemicals declined 0.1% to 623.95 rupees. The company may exit its existing fertilizer business by selling its operations in West Bengal as part a restructuring, Economic Times reported, citing officials aware of the development.
Dr. Reddy's Laboratories, India's second-largest drug maker, declined 1.9% to 2,630.45 rupees. Indian generic drug makers such as Dr. Reddy's have been hit by the increasing pricing pressure in the U.S., where a host of smaller pharmaceutical companies are ratcheting up competition as the regulator has increased the pace of approvals.
The company is "cautiously optimistic" about its performance in this financial year, as it expects pricing pressure to ease off in the U.S., the largest drug market in the world, Dr. Reddy's said in its annual report.
Aluminum and copper producer Hindalco Industries rose 0.8% to 197.85 rupees. Jefferies recommended a 'Buy' on the stock with a target price of 237 per share.
Maruti Suzuki India edged 0.2% higher to 7,371.55 rupees. Deutsche Bank raised the target price to 8,000 rupees from 7,400 rupees and rated the stock as 'Buy'.
--Dhanya Ann Thoppil