The index finally settled at 40,445.15, down 334.44 points or 0.82 per cent. Likewise, the 50-share Nifty shed 96.90 points or 0.81 per cent to settle at 11,921.50.
The BSE gauge Sensex moved 103.13 points higher to trade at 40,882.72 in opening deals; while the NSE barometer Nifty added 22.50 points to 12,040.90.
The Sensex gains were driven by heavyweight Reliance Industries, followed by automakers like Heromoto Corp and Tata Motors.
The 50-scrip NSE Nifty closed 43.10 points or 0.36 per cent higher at 12,037.30. Among the Sensex stocks, Tata Motors emerged as the top gainer, rising by 7 per cent.
Exchange data showed foreign institutional investors (FIIs) sold equities worth Rs 1,131.12 crore on Tuesday.
Bajaj Auto, TCS, Kotak Bank, Infosys and HDFC were among the major gainers on Tuesday.
Traders said that the fresh trade war tensions along with unabated foreign fund outflows weighed heavily on the market sentiments.
On the Sensex, Bharti Airtel emerged as the biggest gainer, followed by Reliance, Asian Paints, Kotak Bank and IndusInd Bank, rising up to 4.17 per cent.
While shares of Vodafone Idea were trading at Rs 8.38, up 22.69 per cent on the BSE, Bharti Airtel appreciated 7.35 per cent to trade at Rs 474.80.
Bharti Airtel emerged as the top gainer by surging 7.92 per cent after it announced to hike tariffs from December, followed by Reliance, Tata Motors, HUL, IndusInd Bank Axis Bank, Infosys and TCS.
The m-cap of SBI jumped Rs 11,334.26 crore to Rs 3,05,087.85 crore, becoming the top gainer among the ten most valuable companies.
While the stock settled 3.85 per cent up at 81 paise on the BSE, the scrip advanced 5.26 per cent to Re 1 on the NSE.
Yes Bank was the top loser in the Sensex pack, shedding 2.50 per cent, followed by Hindustan Unilever, Mahindra & Mahindra, SBI, Tata Motors and Vedanta.
Yes Bank was the top gainer in the Sensex pack, rising up to 4 per cent, followed by Bharti Airtel, Tata Motors, Tech Mahindra, NTPC and Axis Bank.
While Reliance Industries hit Rs 10 lakh crore m-cap, Nifty closed 50.45 points higher at 12,151.15.