Indian shares fell on Thursday as uncertainty about the new government's economic policies chipped away at four days of gains, while bonds weakened on expectations of a hike in US interest rates.
The 30-issue Mumbai Stock Exchange index fell 0.38 percent to 4,944.64 points, after gaining three percent over the preceding four sessions.
Dealers expect the market to trade in a range until the budget is announced in early July.
Shares have tumbled since last month's victory of a Congress-led coalition that needs communist support to stay in power, even though a blueprint of its economic agenda promised progress and reform.
"I think a lot of the bad news is already in the prices. People have got over the initial uncertainty," said Maulik Sharedalal, director of Kaji & Maulik Securities.
"But a fair number of people are on the sidelines. They are waiting for the budget and want to be reassured that coalition politics will not mess up the fiscal situation."
Volumes of shares traded have recently been around half the levels seen earlier this year.
After racing ahead recently, autos reversed slightly on Thursday. Tata Motors fell 1.7 percent to 405.45 rupees and Maruti Udyog lost 1.5 percent to 411.90 rupees.
Cement shares also surrendered some of their recent gains. Grasim Industries lost 4.2 percent to 1,015.65 rupees.
But Hindustan Petroleum Corporation rose 4.6 percent to 357.2 rupees and Bharat Petroleum Corporation gained 4.3 percent to 361.05 rupees amid expectations they will raise prices soon.
Bonds were weak on expectations that a firm global rate trend combined with domestic inflation would eventually trigger local rises. The key 10-year federal bond was dealt at 5.3195 percent, above Wednesday's 5.2875 percent.
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