Reuters Market Eye - The Sensex falls 0.3 percent, while the Nifty declines 0.2 percent, erasing earlier mild gains.
Traders attribute the caution to split views on a potential rate cut at the Reserve Bank of India policy review on July 31, after June headline inflation data rose a less-than-expected 7.25 percent in June, but core inflation remained unchanged at around 4.85 percent from May.
Shares of major banks are mixed, with State Bank of India up 1.2 percent, but ICICI Bank down 0.2 percent.
Property stocks flat to lower, with DLF down 0.1 percent.
Infosys falls 2.3 percent, after already falling 9.8 percent in the previous two sessions, as the stock continues to reel from the company's sharp cut to yearly revenue guidance last week.