Indian shares hit near 2-week lows in thin trade on Monday, on track for a fourth straight session of losses, as investors stayed on the sidelines in the absence of strong global cues.
Asian shares steadied near four-week lows after China agreed to return the U.S. drone it had seized.
But with expectations of U.S. President-elect Donald Trump's policies lifting U.S. interest rates and the dollar, shares in many emerging markets are likely to remain vulnerable to possible capital outflows.
"I expect the markets to remain rangebound till the end of January, before the budget is announced," said R.K. Gupta, managing director of Taurus Asset Management.
Finance Minister Arun Jaitley is expected to present the annual budget for 2017/18 on Feb. 1.
"Because of lacklusture trade during the holiday season, foreign buyers are expected to withdraw funds from the market throughout this month," Gupta said.
Foreign investors net sold shares worth $114.55 million this month up to Dec. 15. They have net bought $4.04 billion this year up to the same period.
The broader NSE Nifty was down 0.25 percent at 8,118.75 as of 0645 GMT, while the benchmark 30-stock BSE Sensex was down 0.27 percent at 26,419.44.
Financial stocks fell, dragged down by HDFC Bank which fell as much as 1 percent, and Axis Bank that lost as much 1.1 percent.
Oil refiners such as Indian Oil Corp and Bharat Petroleum Corp were however up after petrol prices were increased by 2.21 rupees per litre on Friday.
(Reporting by Arnab Paul in Bengaluru; Editing by Biju Dwarakanath)