Shares fell on Monday as investors booked profits in recent outperformers including lenders ahead of inflation data due later in the day, while sentiment was cautious ahead of the U.S. Federal Reserve policy meeting this week.
Inflation in India is expected to have cooled to a new record low of 2.60 percent in May, a Reuters poll found, which could add pressure on the Reserve Bank of India to cut interest rates later in the year.
Asian markets were also lower - with MSCI's broadest index of Asia-Pacific shares outside Japan down 0.8 percent - as shares of electronic products makers fell on caution ahead of the Fed, which is expected to raise rates and signal further increases this year.
"The market has been moving up for quite sometime and it needs to consolidate," said Arun Kejriwal, founder of Kejriwal Research & Investment Services, adding that the fall in banking and IT stocks was owing to profit booking.
The broader NSE Nifty was down 0.51 percent at 9618.55 as of 0643 GMT, while the benchmark BSE Sensex was 0.53 percent lower at 31096.40.
Banking stocks fell as sentiment took a hit after India's western state of Maharashtra agreed on Sunday to write off all loans availed by farmers.
Nifty PSU bank index dropped as much as 1.34 percent, with all its members trading lower, and recorded its biggest intraday percent loss since May 29, while the Nifty Bank index slipped as much as 0.62 percent.
The Nifty IT index fell as much as 1.23 percent, with Wipro Ltd losing as much as 3.04 percent to its lowest in over two weeks.