Indian shares dropped about half a percent on Monday and were headed for their second straight fall, tracking weakness in Asian peers while investors shifted their focus from central banks to American politics.
The first U.S. presidential debate between Republican Donald Trump and Democrat Hillary Clinton, scheduled at 2100 ET (0100 GMT), will be the best opportunity for the two candidates to put to rest questions about their fitness for the White House with the Nov. 8 election fast approaching.
About 20 percent of the electorate remains undecided, a Reuters/Ipsos polling shows, far higher at this stage in the campaign than the 12 percent undecided four years ago.
"I think there could be some shift away from equities to the safer assets ahead of the U.S. elections across the markets globally," said Ambareesh Baliga, a Mumbai-based independent market analyst.
Indian shares have lost momentum after hitting their highest close in 18 months on Sept. 8, with the NSE Nifty shedding about 1.4 percent since then as of Friday's close, on concerns valuations have become too expensive.
The broader Nifty is valued at 21.25 times its estimated 12-month earnings, versus a multiple of 14.27 for the Thomson Reuters Emerging Markets Asia Pacific Index.
The benchmark BSE Sensex was 0.53 percent lower at 28,517.47 as of 0513 GMT, while the NSE index was down 0.44 percent at 8,792.56.
The Nifty Bank index fell 0.87 percent, having risen about 18 percent this year as of Friday's close. HDFC Bank, ICICI Bank and State Bank of India were among the top percentage losers.
Investors are anxiously awaiting the upcoming monetary policy review on Oct. 4, the first to be held under RBI Governor Urjit Patel, amid expectations of a 25 basis point cut in the repo rate.
Among the gainers, Vardhman Textiles Ltd rose 3.8 percent after the company board on Saturday approved a share buyback.
Dilip Buildcon Ltd gained 2.7 percent after the infrastructure firm said on Saturday it got a project worth 6.13 billion rupees from National Highways Authority of India.
(Reporting by Aastha Agnihotri in Bengaluru; Editing by Subhranshu Sahu)