The NSE Nifty 50 Index was down 0.3% at 16,776.0347 GMT, and the S&P BSE Sensex was down 0.4% at 56,183.93.
The Nifty IT index was down 1%, while the auto index was down 0.8%.
The Reserve Bank of India (RBI) is expected to raise interest rates on Friday, with a narrow majority of economists expecting a 50 basis point increase and another 35 basis points smaller, according to a Reuters survey.
The central bank’s Monetary Policy Committee (MPC) has raised its policy rate by 140 basis points since May, to 5.4%, to cool domestic retail inflation which has remained above the RBI’s upper tolerance limit of 6% since January.
The Indian benchmark has fallen about 3% at its last close since the RBI’s decision in early August to raise the buyback rate by 50 basis points.
“The decline in commodity prices offers some relief, but we believe that tighter global financial conditions and high inflation will cause the Monetary Policy Committee to stick to its initial tightening cycle,” Barclays economists wrote in a note before monetary policy.
Investors are also waiting for the RBI to tell them how they intend to deal with the depreciation of the rupee after spending large amounts of foreign exchange reserves to cushion the currency’s decline against the strength of the US dollar. (Reporting by Rama Venkat and Nallur Sethuraman Bengaluru; editing by Dhanya Ann Thoppil)
