MUMBAI: Benchmark indices Sensex and Nifty drifted lower in early trade on Wednesday after a day's breather amid the ongoing tensions in West Asia and sustained foreign fund outflows.
Selling in blue-chip bank stocks also dragged the markets lower.
The 30-share BSE Sensex dropped 96.12 points to 78,109.86 in early trade.
The 50-share NSE Nifty declined 22.95 points to 24,238.65.
From the 30-Sensex firms, Kotak Mahindra Bank, ICICI Bank, Axis Bank, HDFC Bank, Hindustan Unilever and Bajaj Finserv were among the major laggards.
InterGlobe Aviation, Adani Ports, Tata Steel and NTPC were among the gainers.
Brent crude, the global oil benchmark, dipped 0.39 per cent to USD 87.46 per barrel.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 4,672.64 crore on Tuesday, according to exchange data.
Domestic Institutional Investors (DIIs), however bought stocks worth Rs 6,333.26 crore.
"Although equity markets staged a technical rebound on Tuesday, the underlying sentiment remains cautious as the deepening crisis in the Middle East begins to influence global financial markets through higher energy prices, disruptions to key shipping routes, and shifting investor risk appetite," Ponmudi R, CEO of Enrich Money, an online trading and wealth tech firm, said.
From an equity market standpoint, geopolitical disruptions of this nature tend to trigger sharp bouts of volatility as global investors rotate toward safer assets and reduce exposure to risk-sensitive markets, he added.
In Asian markets, South Korea's Kospi climbed over 3 per cent, while Japan's Nikkei 225 traded 2.5 per cent higher.
Shanghai's SSE Composite index and Hong Kong's Hang Seng index were also quoting in positive territory.
The US market ended flat on Tuesday.
"Global cues remain mixed as investors continue to closely track developments in the Middle East and the sharp swings in crude oil prices," Hariprasad K, Research Analyst and Founder, Livelong Wealth, said.
On Tuesday, the Sensex jumped 639.82 points or 0.82 per cent to settle at 78,205.98.
The Nifty climbed 233.55 points or 0.97 per cent to end at 24,261.60.