The benchmark BSE Sensex was trading down by 78.86 points in late morning deals due to selling in rate-sensitive stocks ahead of the key RBI policy announcement.
Investors were awaiting RBI policy outcome due later in the day during market hours, a broker said.
Buying interest in index heavyweights like energy and IT sectors cushioned the losses.
The 30-share index was trading lower by 78.86 points or 0.24 per cent at 32,723.58 at 1045hrs. The broader Nifty was trading below the key 10,100-level, down by 33.30 points or 0.33 per cent at 10,084.95.
Major losers were Tata Steel 1.70 per cent, SBI 1.21 per cent, Bajaj Auto 0.94 per cent, ITC 0.83 per cent and HDFC 0.70 per cent.
Gainers included Reliance 1.39 per cent, Infy 0.57 per cent and Cipla 0.47 per cent.
Foreign portfolio investors (FPIs) sold shares worth a net Rs 1,470.56 crore yesterday, as per provisional data. Domestic institutional investors (DIIs) bought equities worth a net Rs 1,074.39 crore.
Asian shares were trading lower, mirroring losses on the Wall Street. US stock ended lower yesterday, driven by losses in utilities, telecoms and industrials sectors.
-- Rupee falls by 8 paise against dollar --
The rupee fell by 8 paise to Rs 64.46 per dollar in late morning deals following sustained dollar demand from importers and banks.
"A weak dollar overseas capped the rupee losses," a dealer said.
The domestic unit opened lower at 64.44 per dollar against yesterday's closing level of 64.38 per dollar at the interbank forex market. It moved between 64.39 and 64.48 in morning trade.
The US dollar weakened against its major rivals in early Asian trade, as concerns about a possible US government shutdown offset optimism about progress on tax reform legislation.
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