The BSE Sensex and Nifty fell after the Trinamool Congress (TMC), key ally of the ruling coalition, withdrew its support on Tuesday, demanding the government reverse its decision to raise diesel prices and open India's supermarket sector to foreign direct investment.

The government was considering a partial reduction in diesel prices, but will not offer a U-turn on its retail measures, Congress Party sources told Reuters.

Retailers fall: Pantaloon Retail (PART.NS) down 4.3 percent after falling 4.2 percent on Tuesday when it was hit by profit-taking. Shares surged 27.3 o n Friday and Monday.

Shoppers Stop (SHOP.NS) falls 1.7 percent.

Banks fall as any signs of rollbacks on reforms could dent expectations for rate cuts from the RBI: ICICI Bank (ICBK.NS) falls 1.5 percent, while State Bank of India falls 1.1 percent.

However, state-owned oil stocks show no reaction to prospects of a rollback in diesel prices given expectations any retracement would be limited.

Oil stocks reacting most after oil prices slumped on Wednesday in one of the biggest sell-offs in more than a year after Saudi Arabia said it would take steps to moderate oil prices.

Bharat Petroleum Corp (BPCL.NS) gains 2.5 percent while Hindustan Petroleum Corp rises 2.7 percent.