Markets were trading lower following rout in equity markets across the world on concerns of slowing economic growth in US and sovereign debt crisis Europe.

The Nifty made a gap down opening and touched a low of 5,385, however, it recovered marginally in the morning session and was trading at 5,402, down 53 points. The BSE benchmark Sensex was off 164 points, at 17,945.

While US averted debt default after Senate approved 74 to 26 vote of the $2.1 trillion plan for reducing deficit and President Barack Obama signed the bill which raised the US government's debt ceiling, it failed to lift investor sentiment. Fears of credit downgrade by rating agencies loomed. Weak consumer spending data from US further dented investor sentiment. Dow Jones Industrial Average declined 266 points, Nasdaq slipped 75 points and S&P 500 was off 33 points.

In Asia, Japans Nikkei Stock Average declined 2.2%, Hong Kongs Hang Seng Index dipped 1.9%, and China's Shanghai Composite index was down 0.2%.

Back India analysts expect investors to remain cautious if Nifty breaks 5,400. Amit Chedda- Head of Equity at Inventure Growth and Securities said, Nifty is still in a consolidating range but traders need to be cautious if Nifty starts another leg of downtrend. Immediate support stands at 5350-5200.

From the sectoral indices BSE Realty and auto indices were the top losers, down over 2.5% each. From the realty space Indiabulls Unitech plunged and Orbit Corporation lost almost 3% each.

From the auto space, Tata Motors fell over 2%, Cummins India and Mahindra and Mahindra were down over 1% each.

Among individual stocks Bharti Airtel slipped over 1% ahead of the June quarter results

From the broader markets, the midcap and the smallcap indices were off over 1% each.

Top losers on the Sensex were DLF, down 4.3%, Jaiprakash Associates declined over 3% and Tata Motors was off 2.8%.

Market breadth was negative, 1298 stocks declined for 344 stocks which advanced.