The NSE Nifty 50 index was down 0.3% at 16,776, as of 0347 GMT, and the S&P BSE Sensex fell 0.4% to 56,183.93.
The Nifty IT index was down 1%, while the auto index dropped 0.8%.
The Reserve Bank of India (RBI) is set to raise interest rates on Friday, with a slim majority of economists expecting a 50 basis point hike and some others expecting a smaller 35 basis point rise, a Reuters poll showed.
The central bank's monetary policy committee (MPC) has already hiked the key policy rate by 140 bps since May to 5.4% to cool off domestic retail inflation that has stayed above the RBI's upper tolerance limit of 6% since January.
India's benchmark indexes have fallen about 3% as of last close, since the RBI's decision in early August to raise the repo rate by 50 basis points.
"Falling commodity prices offer some relief, but we think tighter global financial conditions and high inflation will lead the MPC to stick to its front-loaded tightening cycle," economists at Barclays wrote in a pre-monetary policy note.
Investors also wait to hear from the RBI on how it plans to tackle the depreciating rupee after having spent massive amount of forex reserves to arrest the currency's fall against the strong U.S. dollar.
(Reporting by Rama Venkat and Nallur Sethuraman in Bengaluru;Editing by Dhanya Ann Thoppil)