Mumbai, May 5 (IANS): The Indian equity indices pared all the gains made earlier in the day to settle in the negative territory, with heavy selling during the last hour of trade.

According to analysts, investors took to profit booking after the indices gained during most of the trading session.

Heavy selling was witnessed in the banking and finance stocks. The S&P BSE Banking index closed 2.39 per cent lower and the Finance index ended lower by 1.93 per cent.

Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services said: "Indian equity markets after opening on a positive note ended in red on the back of continued profit booking."

The volatitlity index 'India VIX' also remained at higher levels of 43, he said.

Khemka added that earnings have already seen a sharp 30 per cent downward revision and market now expects the Nifty to deliver another year of flattish earnings in FY21.

"Early results of 4QFY20 earnings season and management commentaries suggest more volatility and disruption in earnings ahead. In the near-term, we expect the market direction to depend upon the spread and intensity of COVID cases, and incremental government/ regulatory actions to restart the economy," he said.

The BSE Sensex closed at 31,453.51, lower by 261.84 points or 0.83 per cent from the previous close of 31,715.35.

It opened at 32,182.90 and touched an intra-day high of 32,264 and a low of 31,403.57.

The Nifty50 on the National Stock Exchange closed at 9,205.60, lower by 87.90 points or 0.95 per cent from the previous close.