The rupee and BSE Sensex trimmed gains after the Reserve Bank of India announced it would raise investment limits in government bonds, disappointing investors who had expected bolder measures.
At 2:39 pm Mumbai time, the rupee was at 56.96/97 to the dollar, weakening from 56.55 levels before the announcement.
The currency was still up on the day, after closing at 57.12/13 on Friday, and still well above its record low of 57.32 hit in the previous session.
India's benchmark indexes erased earlier mild gains to fall, with BSE Sensex down 0.2 percent.