The sentiment was negative after Iran fired more than a dozen missiles at two US military targets inside Iraq in response to the United States' killing of senior Iranian military commander Qassem Soleimani last week.
Sensex pared losses in the fag-end of the session, and settled at 40,800, down 52 points and the Nifty50 closed at 12,025-mark, down 27.60 points.
About 742 shares have advanced, 1,054 shares declined, and 351 shares are unchanged on the NSE.
Bharti Airtel, Yes Bank, TCS and UltraTech are among the top gainers on the Nifty index, while losers included Eicher, Coal India, L&T.
Among sectors, except FMCG and IT, other indices ended lower led by auto, metal, pharma and infra.
Shares of MMTC gained over 9% after the government approved stake sale in Neelanchal Ispat Nigam.
Meanwhile, European shares are trading lower today. The DAX is down 0.66%, the CAC 40 is off 0.50%, and London's FTSE 100 is trading lower by 0.47%.
Also, Asian indices ended lower today with all major indices down by over 1%.