Closing bell: Sensex drops by 106 points to close at 65,846; Nifty at 19,570

Indian stock market updates: Benchmark equity indices fell on Tuesday as investors turned cautious ahead of the key events -- RBI's monetary policy and the US inflation data -- due to be announced later this week.

Continuous foreign fund outflows and weak trend in Asian and European markets also played spoilsport for the domestic markets.

The 30-share BSE Sensex fell 106.98 points or 0.16 per cent to settle at 65,846.50. During the day, it declined 200.85 points or 0.30 per cent to 65,752.63.

The NSE Nifty slipped 26.45 points or 0.13 per cent to end at 19,570.85.

Amid expectations of another status quo on the key interest rates, RBI Governor Shaktikanta Das-headed high-powered rate-setting panel MPC on Tuesday began its three-day meeting to firm up the next bi-monthly policy.

The decision of the Monetary Policy Committee (MPC) would be announced on Thursday, August 10, by Governor Das.

From the Sensex pack, Power Grid, Mahindra & Mahindra, JSW Steel, HCL Technologies, Sun Pharma, Nestle, IndusInd Bank, Reliance Industries, Bharti Airtel and ITC were the major laggards.

Tech Mahindra, Wipro, Bajaj Finance, State Bank of India, Bajaj Finserv, Axis Bank, Titan and ICICI Bank were among the major gainers.

In Asian markets, Seoul, Shanghai and Hong Kong settled lower while Tokyo ended in the green.

European markets were quoting in the negative territory. The US markets ended in the positive territory on Monday.

Global oil benchmark Brent crude fell 1.38 per cent to USD 84.16 a barrel.

Foreign Institutional Investors (FIIs) offloaded equities worth ₹1,892.77 crore on Monday, according to exchange data.

"While global cues will continue to dictate trends, investors would be watchful of the two key catalysts - RBI's monetary policy and US inflation data on Thursday," said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.

The BSE benchmark had climbed 232.23 points or 0.35 per cent to settle at 65,953.48 on Monday. The Nifty advanced 80.30 points or 0.41 per cent to end at 19,597.30.