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The Nifty edged lower on Monday to near a seven-month low, as software services exporters fell ahead of what is widely expected to be a lacklustre earnings season, and as foreign funds continued to exit local holdings.
The Sensex notched a fourth consecutive session of falls, tracking a decline in Asian shares after disappointing US jobs data and rising geopolictical tension in the Korean peninsula worried global investors.
The outlook for shares remains cautious as foreign institutional investors - a critical part of markets - have now sold $114.3 million worth of stocks in three successive sessions to Friday, according to regulatory data.
However, some analysts said domestic indexes may be oversold in the near term, raising the prospect of a bounce back.
"We need to closely watch the fund flows. There may not be much interest in Indian markets in 1-2 weeks also as fund outflows set in delayed relative to other emerging markets, but eventually fund flows will come in," said Rajesh Cheruvu, chief investment officer for India private banking at RBS.
"The market has broadly factored in muted earnings. Valuations are pretty much attractive and we do not see much downside from here on," he said.
The broader 50-share Nifty fell 0.19 per cent, or 10.30 points, to close at 5,542.95, its lowest close since September 13.
The Sensex declined 0.07 per cent, or 12.45 points, to close at 18,437.78, to its lowest close since November 20.
Technology shares led the falls after the poor US non-farm payrolls data raised concerns about the recovery in the US economy, the biggest outsourcing market for the IT firms.
Infosys fell 1.2 per cent ahead of earnings on Friday. Other technology shares like Wipro edged down 1.3 per cent, while Tata Consultancy Services was 1.2 per cent lower.
Indian lenders fell as investors remained cautious on the prospect of future monetary easing on the high current account deficit and retail inflation.
