By Arnab Paul
NBFCs including Indiabulls Housing Finance Ltd and Dewan Housing Finance Corp Ltd extended losses and were down 5.8 percent and 4.4 percent, respectively.
Last week, a news report alleged that Zee Entertainment Enterprises Ltd's promoter Essel Group may figure in a probe linked to demonetisation-led deposits of 30 billion rupees ($421.82 million).
Zee, which denied any involvement with the large cash deposit transactions, said promoter stake sale and Essel Group's stressed asset sale plans are still on track.
Essel Group is among the larger borrowers from domestic mutual funds, and mutual funds' NBFC exposure is still high, research firm Credit Suisse said in a note.
Mutual funds' exposure to Essel Group is through more than 100 schemes, and concerns about the group may therefore lead to a second wave of risk aversion in domestic debt fund and volatility in their flows, the note added.
However, analysts said investors chose to maintain a cautious stance ahead of the fiscal budget due on Feb. 1.
"There is definitely some caution and a high-pitched election coming up, markets are likely to be very volatile in the next 3-4 months," said Naveen Kulkarni, head of research, Reliance Securities.
"NSE target for December is 12,000."
The broader NSE Nifty was down 0.18 percent at 10,642.05 as of 0538 GMT, while the benchmark BSE Sensex slipped 0.20 percent to 35,583.89.
Asian shares traded lower as investors showed concerns after the prospects of a long-awaited Sino-U.S. trade deal was dealt another blow after the United States levelled sweeping criminal charges against China's telecom giant Huawei.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.06 percent.
The Nifty IT index was trading 0.65 percent lower after posting gains of 1.5 percent in the last three sessions. Infosys Ltd dropped as much as 1.23 percent, while HCL Technologies Ltd, which will report its quarterly earnings later in the day, slipped up to 1.4 percent.
Housing Development Finance Corp and Axis Bank Ltd, which are scheduled to report their December-quarter results later in the day, were down 0.1 percent and 0.12 percent, respectively.
Among the gainers, UltraTech Cement Ltd traded 3.8 percent higher, recovering from a three-day losing streak, which saw the stock shed about 12.4 percent.
($1 = 71.1210 Indian rupees)
(Reporting By Arnab Paul in BENGALURU, Editing by Sherry Jacob-Phillips)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)