Domestic markets surrendered early gains to close in the red for the second straight session on Tuesday as sentiment remained risk-averse amid lacklustre corporate earnings and a deepening sell-off in Asian markets post-China's regulatory crackdown on tech companies.

The 30-share BSE Sensex skidded 273.51 points or 0.52 per cent to finish at 52,578.76, while the broader NSE Nifty fell 78 points or 0.49 per cent to 15,746.45.

Dr Reddy’s was the top loser among the Sensex constituents, plunging 10.44 per cent, after the company reported a 36 per cent decline in consolidated net profit at Rs 380.4 crore for the quarter ended June 30, 2021, on account of higher expenses.

Axis Bank, Kotak Bank, Sun Pharma, HDFC, M&M, and Asian Paints fell up to 3.23 per cent.

On the other hand, Tata Steel, Bajaj Finserv, SBI, Bajaj Finance, Nestle India, and L&T were among the major winners, climbing as much as 2.50 per cent.

"Stocks gave up gains as investors were nervous about the selling across Chinese markets by global funds coupled with the policies of the Chinese authorities and the likely impact on Indian markets despite knowing that it is also a positive for India," said S Ranganathan, Head of Research at LKP Securities.

While we did see profit booking across banks and the pharma pack on account of negative news flow on few pharma names, certain pockets across the broader market like textile exporters and coffee stocks posted smart gains on the back of rising coffee futures, he added.

Vinod Nair, Head of Research at Geojit Financial Services, said, "Domestic market skewed in favour of the bears, failing to hold onto its early gains due to weak global cues and selling in pharma stocks. Bleeding pharma companies pulled down the market due to a weak start to sector earnings season. It created panic as the sector is priced with high expectations."

Broadly, barring metals and consumer durables, all major sectors traded in negative territory. Heavy selling in China and weakening Asian peers ahead of the crucial Fed Reserve policy meeting this week also played a role, he added.

Sectorally, BSE healthcare, power, energy, and utility indices fell up to 2.90 per cent, while metal, consumer durables and basic materials ended with gains. Broader BSE midcap and smallcap indices shed up to 0.67 per cent.

In Asia, bourses in Shanghai and Hong Kong witnessed massive selloff as data safety and other enforcement actions weighed on Chinese internet and other companies. Seoul and Tokyo ended with gains.

Stock exchanges in Europe were trading with losses in mid-session deals.

Meanwhile, international oil benchmark Brent crude advanced 0.30 per cent to $73.91 per barrel.

The rupee slipped by 5 paise to close at 74.47 against the US currency on Tuesday as the dollar strengthened in the overseas markets.

Foreign institutional investors were net sellers in the capital market on Monday as they offloaded shares worth Rs 2,376.79 crore, as per exchange data.