Sensex fell over 111 points to close at 29,918.40 today as investors booked profits amid mixed global trends.
The euro sank to a day's low and European stock markets and bond yields fell back, undoing initial gains.
Expiry of April derivatives contracts got under way, making participants hold back their bets.
Investors remained cautious in the face of expiry of April series contracts in the derivatives segment, which also weighed.
U.S. stocks ticked lower on Wednesday following two sessions of strong gains as corporate earnings were offset by uncertainty over the proposed business tax cut.
The BSE cautioned investors not to be carried away by the "euphoria" and refrain from investing in penny stocks.
Sensex opened on a strong footing and surged to a lifetime high of 30,167.09 pts in intra-day trade, before settling at 30,133.35.
Asian stocks extended gains for a fifth straight day on Wednesday as Wall Street hit new peaks while the euro consolidated recent gains.
The Nasdaq Composite hit a record high on Tuesday, while the Dow and S&P 500 brushed against recent peaks as strong earnings underscored the health of corporate America.
Oil prices edged up in volatile trading on Tuesday, rebounding from six days of losses, ahead of U.S. crude inventory data forecast to show a drawdown.