Last week, Rai had written a two-page letter to the court stating that he wants to reveal the truth and had sought pardon in the case.
When Special Judge H S Mahajan called Rai in the box today, he said, "I am aware about the acts connected with the commission of the offence and was a participant to the murder (of Sheena)."
When the judge asked him about the case, he told the court that Sheena was killed by strangulation.
He also told the court that he was under "no pressure, threat or coercion" to reveal the facts in the case and was "repentant" for his act.
The court directed CBI to file its reply on May 17 over Rai's plea to turn approver in the case.
Rai was the first accused to be arrested in connection with the murder case in August 2015.
The killing came to light after Rai was picked up in connection with an arms case and later spilled the beans.
Two days ago, the court had castigated Thane jail officials for failing to produce Rai before the court and had warned of contempt proceedings while directing them to bring him today.
The court had also directed CBI to file its written submission on Indrani's husband Peter Mukerjea's bail plea on May 13, failing which the court said it will fix the matter for passing the order.
Peter's bail application had been rejected in the past.
Indrani, her former husband Sanjeev Khanna and Rai had allegedly strangled Sheena (24), Indrani's daughter from earlier relationship, inside a car in April 2012. The crime, which came to light in August, is allegedly linked to certain financial dealings.
The trio were arrested in August last year while Peter was arrested in November. According to CBI, Peter was part of the murder conspiracy.
While Peter (59), Khanna and Rai are lodged in Arthur Road prison, Indrani (43) is in Byculla womens' jail.
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