Indian shares slipped on Thursday, hurt by financials, while doubts whether the Bharatiya Janata Party (BJP) could prove its majority in the southern state of Karnataka weighed on investor sentiment.
State BJP president B S Yeddyurappa was sworn in as chief minister on Thursday morning even though his party fell short of an outright majority. He has now 15 days to prove his majority in the state legislative assembly.
The state election had a temporary effect on the markets, but macro-economic factors such as the rise in crude oil prices and inflation will have a bigger say in the medium term, said analysts.
India's retail inflation accelerated for the first time in four months in April, suggesting the central bank may turn hawkish at its policy meeting next month.
"There are also concerns over foreign institutional investments," said Deepak Jasani, head of retail research at HDFC Securities.
Foreign investors, who have been net buyers of Indian equities worth $766.24 million this year as of May 16, sold shares https://bit.ly/2rMEaEO worth a net 6.99 billion rupees on Wednesday.
The broader Nifty index was down 0.31 percent at 10,707.35 as of 0707 GMT, while the benchmark BSE Sensex was 0.34 percent lower at 35,267.44.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.22 percent.
Housing Development Finance Corp fell as much as 1.7 percent, while Reliance Industries Ltd declined 1 percent.
Muthoot Finance Ltd fell as much 7.6 percent after the company reported weak quarterly revenue from financing.
Tata Steel Ltd fell as much as 3.1 percent after the company posted a quarterly profit on Wednesday on the back of a one-off pensions gain.
Among the gainers, Divi's Laboratories Ltd rose as much as 4.1 percent after a unit in Telangana did not receive any 483 observations following an inspection by the U.S. Food and Drug Administration.