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Indian shares ended lower on Wednesday, dragged by auto stocks, while a weaker broader market weighed on sentiment.

The Nifty 50 index ended 0.18% lower at 17,624.4, after falling up to 1% earlier in the session. The S&P BSE Sensex closed 0.28% lower at 59,028.91.

The Nifty Midcap 100 and the Nifty Smallcap 100 indexes outperformed blue-chip stocks, closing 0.5% and 0.8% higher, respectively.

Meanwhile, data overnight showed the U.S. services industry picking up in August, fuelling fears of the Federal Reserve pursuing steep interest rate hikes to tame inflation. That sent Wall Street and Asian stock markets lower. [MKTS/GLOB]

Indian markets have however outperformed their peers, with the Nifty 50 rising around 1.5% this year, compared with a 20% drop in MSCI's broadest index of Asia-Pacific shares outside Japan.

Still, India is too interlinked with the global economy for a real decoupling, analysts at Kotak Institutional Equities Research noted, adding that the valuations are "quite expensive".

"We are not sure if the Indian market is factoring in risks from short-term factors such as higher-for-longer inflation, unlike other markets."

The Nifty Auto index was the worst performing sub-index, sliding 1.2%. Tata Motors led the decline with a 2.6% drop, while Bajaj Auto fell 2.1%.

Earlier in the day, India's road transport minister said he expects to finalise rules for all cars to have six airbags by the end of this fiscal year. Some carmakers have resisted the rules, saying it will increase vehicle prices and hurt demand.

The decline in autos was partly offset by tech and cement stocks.

The Nifty IT index recovered from a 0.9% drop earlier in the session to settle 0.3% higher.

Cement majors Shree Cement and UltraTech Cement advanced 7.1% and 4.2% each, leading the gains in Nifty 50.