Mumbai: Indian equity markets erased gains made earlier today and closed nearly 1% lower on Tuesday as investors exercised cautioned ahead of the Lok Sabha election result due on 23 May.

The Sensex closed 1% lower at 38969.80 points, while the NSE Nifty 50 index fell 1.01% to close at 11,709.10 points. So far this year, the Sensex has risen 9%.

Analysts believe domestic markets have already priced in Prime Narendra Modi's re-election, with little room for a further rally and today’s behavior was the proof needed.

"For the markets, a positive outcome is now in the price. Ability of the markets to sustain these gains in the short term will, however, require actual poll outcome to be close or better than exit polls suggest; global catalysts, particularly oil prices and US-China trade dispute, both of which are unfavourable at this juncture", said Radhika Rao economist at DBS Bank.

Traders were also cautious as crude oil prices rose for the second day on Tuesday following signs that the Organization of Petroleum Exporting Countries (OPEC) and its allies will extend production cuts beyond June. The market also worried about the steadily deteriorating US-China trade relationship.

Analysts continued to eye quarterly corporate earnings which are showing signs of a slowdown. Net incomes of 24 of 36 Nifty companies that have reported earnings so far have either topped or met the analyst estimates, according to data compiled by Bloomberg.

Tata Motors Ltd fell nearly 7% despite reporting a net profit of 1,117 crore Jan-Mar period - its first quarterly profit in the fiscal. Net profit topped analysts’ estimates. Subsidiary Jaguar Land Rover, however, cut its profit margin and cash flow outlook, according to an investor note from Jefferies India.