The Nifty closed down 0.07% at 11,527.45, while the Sensex ended 0.24% lower at 38,990.94.

Earlier in the day, an industry survey showed activity in India's coronavirus-crippled services industry contracted for a sixth straight month in August, albeit at a slower pace than July.

Investor sentiment was also dampened as U.S. stock futures fell as a rally in technology stocks cooled and investors awaited a batch of economic data. [.N]

"Traders and investors in the near term would like to wait and watch for more clarity in ... where the market is leading. Valuations are high and we have had a big runup, so traders are not in a hurry to put in their money right now," said Umesh Mehta, head of research at Samco Securities.

The Nifty Bank index fell 1.44%, as India's top court heard a case for waiving interest rates on loans under a moratorium. ICICI Bank Ltd was the top laggard on the Nifty, closing 2.5% down.

India's most valuable company, Reliance, closed 0.8% lower.

The Nifty IT index closed 1.5% higher. IT majors Infosys and Tata Consultancy Services were the top boosts to the Nifty, closing 1.3% and 1.5% higher, respectively. The Nifty pharma index closed 0.94% higher.

Shares in Vodafone Idea closed 26.8% higher after a report said Verizon Communications Ltd and Amazon.com Inc may invest more than $4 billion for a stake in the telecom firm.

Grasim Industries Ltd, a shareholder of Vodafone Idea, closed 6.8% higher and was among the top percentage gainers on the Nifty.

The Nifty Auto index closed up 0.91%, with Tata Motors up 1% after reporting higher August sales.

(Reporting by Anuron Kumar Mitra in Bengaluru; Editing by Ramakrishnan M.)

By Anuron Kumar Mitra