Equity indices languished for the second straight session on Tuesday as investors pared back their exposure to riskier assets amid a cautious trend in global markets due to a fresh spurt in COVID-19 cases in many countries.

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A weakening rupee and the fiscal impact of the government's new stimulus measures also sapped risk appetite, traders said.

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The 30-share BSE Sensex ended 185.93 points or 0.35 per cent lower at 52,549.66. Similarly, the broader NSE Nifty tumbled 66.25 points or 0.42 per cent to 15,748.45.

Kotak Bank was the top loser among the Sensex constituents, shedding 1.54 per cent, followed by ICICI Bank, Tech Mahindra, Bajaj Auto, Axis Bank, Mahindra and Mahindra, SBI and Maruti.

On the other hand, PowerGrid, HUL, NTPC, Dr Reddy's, Nestle India and IndusInd Bank were among the gainers, spurting up to 1.75 per cent.

"Despite the government's stimulus package to revive stressed sectors, domestic equities continued to trade weak due to new coronavirus outbreaks in Asia. Extension of emergency credit guarantee scheme to MSMEs and subsidised financing to small borrowers will be a boost to the microfinance and NBFC sectors.

"Amid a broad-based selling in the market, the healthcare sector managed to remain positive due to the extended government support" said Vinod Nair, Head of Research at Geojit Financial Services.

The latest credit push for the pandemic-hit sectors and other relief supports will have an additional 60 bps impact on the fiscal deficit, and can offer an additional liquidity window of Rs 70,000 crore to banks, SBI Research said in a report.

Arijit Malakar, Head of Research Ashika Stock Broking, said, "Domestic markets remained weak in line with Asian markets as investors were concerned with the more infectious Delta variant of the coronavirus and the re-imposition of restrictions in parts of Asia, Europe, South Africa and South America."

Sector-wise, BSE metal, oil and gas, telecom, bankex and auto indices fell up to 1.35 per cent, while healthcare, FMCG and utilities closed with modest gains.

Broader BSE midcap and smallcap indices fell up to 0.42 per cent.

Asian markets tumbled amid a spike in COVID-19 cases in multiple countries. Bourses in Shanghai, Hong Kong, Seoul and Tokyo ended with losses.

Stock exchanges in Europe were, however, trading with gains in mid-session deals.

Meanwhile, international oil benchmark Brent crude was trading 0.27 per cent lower at USD 73.94 per barrel.

The rupee weakened by 4 paise to end at 74.23 against the US dollar as weaker domestic equities and stronger dollar index weighed on forex market sentiment.

Foreign institutional investors were net sellers in the capital market on Monday as they offloaded shares worth Rs 1,658.72 crore, as per exchange data.