Indian stocks and bonds extended falls on Thursday ahead of weekly inflation data, amid worries about both rising prices and how the government and central bank will respond.
The benchmark 30-share Mumbai Stock Exchange index fell 0.68 percent to 5,139.77 points, down 2.1 percent in two days as the market retreats from a 12-week high a week ago.
"We saw a further correction on the index after yesterday, and this will continue for a while longer, until there is more clarity on oil prices and the impact of inflation," said Deven Choksey, chairman of KRC Shares and Securities Ltd.
The median of a Reuters poll for inflation in the year to July 31 was 7.50 percent, compared with 7.51 percent a week ago, which was a 3-1/2-year high. This week's data is due on Friday.
Oil prices remained firm at just below $45 per barrel on Thursday, and renewed concerns about a slowdown in the technology sector had dragged some global markets lower.
Cement, steel and petrochemicals makers slipped further in Bombay following the finance minister saying this week that the government and central bank would move to curb inflation, and that manufacturers were not justified in raising prices.
Index heavyweight and top petrochemicals maker Reliance Industries slipped nearly 1 percent. Grasim Industries Ltd, the biggest cement maker, fell 1.4 percent.
Bond yields closed at fresh 1-1/2-year highs on pre-inflation data jitters. The bellwether 10-year yield climbed to 6.6519 percent from Wednesday's 6.5427 percent.
This was its highest close since 6.6930 percent on February 14, 2003.
Traders worry about the inflation triggering a monetary tightening. The 10-year yield has risen by 157 basis points since late April, when the inflation rate began its steady climb.