The Sensex was trading lower by 30 points, while the Nifty dropped 10 points in early trade. Banking stocks once again led declines on fears that the RBI would hike rates in its policy meet of December 18.
Among the stocks from the sector that declined were Yes Bank, Union Bank, State Bank of India and Canara Bank.
However, ICICI Bank and Bank of India bucked the trend.
Software stocks were having a mixed session in trade with Infosys dropping, while Tata Consultancy Services and Wipro gained ground in trade.
Shares of United Bank of India fell more then 1 per cent after reports that The Reserve Bank of India (RBI) has restrained Kolkata-based bank from advancing a loan of more than Rs.10 crore to any single borrower.
Shares on GlaxoSmithKline jumped 20 per cent after the company announced a voluntary open offer to increase its stake in its publicly-listed pharmaceuticals subsidiary in India from 50.7 per cent to up to 75 per cent at a price of Rs 3,100 per share.
Mid cap stocks were trading higher with the Mid Cap index marginally higher in trade. Among the gainers from the space were Karnataka Bank, MRF, Voltas and Aurobindo Pharma.
Meanwhile, most of the Asian markets were trading lower on fears of QE3 tapering later this week. The Japanese Nikkei was trading lower by 1.22 per cent, while the Shanghai Composite also dropped 1 per cent in trade.