The Sensex and Nifty ratcheted up to fresh lifetime highs on Wednesday but failed to hold on to the gains as investors took some money off the table amid concerns over frothy valuations.

IT, metal, and auto counters bore the brunt of the selling pressure, while FMCG stocks saw brisk demand.

After touching a lifetime high of 57,918.71 during the session, the 30-share BSE Sensex pared all gains to end 214.18 points or 0.37 per cent lower at 57,338.21, breaking its four-session winning run.

Similarly, the broader NSE Nifty snapped its seven-day record-setting spree, settling 55.95 points or 0.33 per cent lower at 17,076.25. It touched an intra-day record of 17,225.75.

Auto stocks were subdued after companies posted muted sales numbers for August.

M&M was the top loser among the Sensex constituents, shedding 2.89 per cent, followed by Tata Steel, Bajaj Finserv, TCS, HDFC, Infosys and HCL Tech.

On the other hand, Asian Paints, Nestle India, Axis Bank, Dr Reddy's, Titan and L&T were among the gainers, climbing up to 3.20 per cent.

"Despite a strong opening after favourable GDP data, domestic indices failed to hold onto its early gains due to profit booking strategy from the recent rally," said Vinod Nair, Head of Research at Geojit Financial Services.

India's GDP rose by a record 20.1 per cent in Q1 due to the low base effect and was powered by private consumption expenditure and investment. The auto sector showed a flattish trend as sales for August saw a decline following supply constraints, he added.

Ajit Mishra, VP - Research, Religare Broking Ltd, said the benchmarks took a breather after the recent rally.

"Markets may see some consolidation ahead and it would be healthy. We reiterate our view to focus on the banking index for further directional move in Nifty. On the downside, the Nifty may find support around the 16,900 zones. Considering the trend, traders should continue with the 'buy on dips' approach," he added.

Sectorally, BSE metal, IT, teck, basic materials, and finance indices lost as much as 1.83 per cent, while realty, power, consumer durables, utilities and capital goods indices gained up to 5.46 per cent.

Broader BSE midcap and smallcap indices rose up to 0.92 per cent.

India's manufacturing sector activity moderated in August, as business orders and production rose at softer rates due to the pandemic and rising input costs, a monthly survey showed,

The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) stood at 52.3 in August, down from 55.3 in July, indicating a softer rate of growth that was subdued and below its long-run average.

Meanwhile, signalling to accelerate economic activity, GST collection topped the Rs 1-lakh-crore mark for the second straight month in August at Rs 1.12 lakh crore.

Global equities shrugged off weak PMI data and rising Delta variant cases in multiple countries.

In Asia, bourses in Shanghai, Hong Kong, Tokyo, and Seoul ended on a positive note. Equities in Europe were also trading with gains in the afternoon session.

International oil benchmark Brent crude rose 0.31 per cent to USD 71.85 per barrel.

The rupee snapped its four-session winning run to close 8 paise lower at 73.08 against the US dollar on Wednesday amid a strengthening greenback overseas.

Foreign institutional investors were net buyers in the capital market on Tuesday as they purchased shares worth Rs 3,881.16 crore, as per exchange data.