Indian shares fell on Thursday, as investors waited for early forecasts on the winner of a key state election, with sentiment also muted as inflation ticked higher and industrial output weakened.
Bonds and the rupee, however, rose after the U.S. Federal Reserve raised interest rates.
Votes from the election in the western Indian state of Gujarat will be counted on Dec. 18 and the results announced the same day, but markets were on edge ahead of exit polls due later on Thursday that usually indicate the likely winner ahead of official results.
Prime Minister Narendra Modi's government is hoping a big win in the state would bolster the ruling Bharatiya Janata Party's electoral prospects ahead of general elections in 2019.
The broader NSE Nifty was down 0.23 percent at 10,170.22 as of 0641 GMT, while the benchmark BSE Sensex was 0.22 percent lower at 32,981.10.
"The markets will react to the Fed hike news, but investors are jittery ahead of the exit polls from Gujarat elections," said Siddhartha Khemka, head of research (retail) at Motilal Oswal Securities.
"With the latest macro-economic data and ahead of the election results, shares will remain volatile."
The Nifty volatility index, a barometer of investor fear, hit its highest level since Feb. 1 on Thursday.
India's retail inflation in November breached the central bank's medium-term target of 4 percent, which could put pressure on it to raise policy rates in 2018, while the country's annual industrial output grew a lower-than-expected 2.2 percent in October.
The Fed raised interest rates for a third time this year on Wednesday, but left its rate outlook unchanged.