Caution ahead of the Union Budget's presentation, coupled with negative global cues and outflow of foreign funds, subdued the Indian equities markets on Tuesday.

The Budget session of Parliament started on Tuesday with President Pranab Mukherjee's address to a joint sitting of both Houses of Parliament. Union Finance Minister Arun Jaitley tabled the Economic Survey for 2016-17.

However, investors were worried about the political logjam over the recent demonetisation decision that could stall Parliament's proceedings.

Besides, global markets were spooked ahead of the Federal Open Market Committee (FOMC) rate decision on Wednesday.

The key indices closed the day's trade in the red -- with losses of more than half a per cent each, as heavy selling pressure was witnessed in stocks of IT, oil and gas and healthcare companies.

The wider 51-scrip Nifty of the National Stock Exchange (NSE) edged down 71.45 points or 0.83 per cent, to 8,561.30 points.

The barometer 30-scrip sensitive index (Sensex) of the BSE, which opened at 27,867.92 points, closed at 27,655.96 points -- down 193.60 points or 0.70 per cent, from the previous close at 27,849.56 points.

The Sensex touched a high of 27,867.92 points and a low of 27,624.54 points during the intra-day trade.

The BSE market breadth was tilted in favour of the bears -- with 1,905 declines and 814 advances.

In terms of broader markets, the mid-cap and small-cap stocks underperformed the benchmark index, with losses of more than one per cent each.

The BSE mid-cap index fell by 1.10 per cent, whereas the BSE small-cap index was down by 1.03 per cent.

On Monday, the NSE Nifty inched down 8.50 points or 0.10 per cent, to close at 8,632.75 points, while the BSE Sensex was down 32.90 points or 0.12 per cent.

"Markets corrected sharply on Tuesday ahead of the Budget to be presented on Wednesday," Deepak Jasani, Head - Retail Research, HDFC Securities, told IANS.

"Major Asian markets have ended lower. But European indices like FTSE 100, CAC 40 and DAX traded higher."

According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, the CNX Nifty ended in the negative territory, with IT stocks bearing brunt of the pain on account of H-1B visa reform bill.

"On top of that, Union Budget and Railway Budget being presented tomorrow, investors were willing to book some profit and move sideways," Desai added.

The Indian rupee strengthened by eight paise to 67.87 against a US dollar from its previous close of 67.95 to a greenback.

The provisional data with exchanges showed that foreign institutional investors (FIIs) sold stocks worth Rs 532.88 crore, while the domestic institutional investors (DIIs) bought scrip worth Rs 237.37 crore.

Sector-wise, all the sub-indices ended in the red, except the FMCG index -- which rose by 3.75 points.

The S&P BSE IT index plunged by 292.54 points, followed by the oil and gas index, which declined by 213.77 points, and the healthcare index, which slipped by 206.74 points.

Major Sensex gainers on Tuesday were: ITC, up 0.84 per cent at Rs 258.05; Power Grid, up 0.76 per cent at Rs 206.55; Bajaj Auto, up 0.44 per cent at Rs 2,837.75; ONGC, up 0.25 per cent at Rs 202.15; and Hindustan Unilever (HUL), up 0.19 per cent at Rs 855.15.

Major Sensex losers were: Tata Consultancy Services (TCS), down 4.47 per cent at Rs 2,229.90; Gail, down 3.41 per cent at Rs 467.20; Adani Ports, down 3.23 per cent at Rs 293.40; Sun Pharma, down 2.06 per cent at Rs 631.55; and Infosys, down 2.01 per cent at Rs 929.30.