The BSE Sensex ended 421.82 points or 1.10 per cent lower at 38,071.13, while the NSE Nifty tumbled 97.70 points or 0.86 per cent to 11,202.85.
Reliance Industries was the top loser in the Sensex pack, dropping 3.75 per cent, followed by Nestle India, HCL Tech, M&M, HDFC Bank, Maruti and Tech Mahindra.
The country's largest carmaker Maruti Suzuki India on Wednesday reported its first ever quarterly loss since going public 17 years back, with a consolidated net loss of Rs 268.3 crore for the first quarter ended June 30, hit hard by the coronavirus pandemic.
On the other hand, IndusInd Bank, Tata Steel, Sun Pharma, Bajaj Finance, UltratEch Cement and L&T were among the gainers, spurting up to 4.54 per cent.
According to traders, besides stock-specific profit booking, domestic market participants were also cautious ahead of the US Federal Reserve's policy outcome.
Concerns over the rising number of COVID-19 cases too spooked investors after India's tally went past 15 lakh on Wednesday, two days after it crossed the 14-lakh mark, with 48,513 fresh cases recorded in a day.
"Indian indices gave up gains and closed in the negative with profit booking seen in the recent outperformer RIL. Global markets were generally undecided ahead of the US Fed Reserve meeting and mixed earnings reports in addition to rising virus cases forcing economies to reconsider restrictions to contain the spread.
"Stock specific action was also visible, post earnings...and this trend is expected to continue. Adequate liquidity in the market should ensure that these corrections are bought into," said Vinod Nair, Head of Research at Geojit Financial Services.
BSE energy, auto, oil and gas, IT, consumer durables and teck indices fell up to 3.04 per cent, while healthcare, metal, basic materials and telecom closed with gains.
Broader BSE mid-cap and small-cap indices bucked the market trend to end 0.68 per cent higher.
Global markets were mixed as investors awaited the US Fed's policy decision.
Bourses in Shanghai, Hong Kong and Seoul ended higher, while Tokyo settled in the red.
Stock exchanges in Europe were trading on a mixed note in early deals.
Global oil benchmark Brent crude was trading 1.28 per cent higher at USD 44.17 per barrel.
On the currency front, the rupee gained 4 paise to settle at 74.80 against the US dollar.