The BSE index is down 0.24 percent while the NSE index falls 0.27 percent.
Traders are cautious as the Nifty approaches a key psychological level of 6,000, a level last seen Jan. 7, 2011.
European shares fall on Monday, after Italian Prime Minister Mario Monti's decision to resign early triggers fears of a fresh bout of euro zone uncertainty.
Traders say markets are awaiting fresh triggers from the government, in the form of a pick up in the investment cycle, which will help growth.
Traders are expecting the banking bill to be passed which the RBI has said was a pre-condition to invite new banking licences.
Likely candidates for banking licences rose: Reliance Capital Ltd gains 1.9 percent, L&T Finance Holdings Ltd rises 4.8 percent while Mahindra & Mahindra Financial Services Ltd is up 7 percent.
State-run banks that gained on capital infusion hopes: Union Bank of India is up 3 percent, Oriental Bank of Commerce gains 5.3 percent.
Reliance Industries falls 1.34 percent after gaining 5.15 percent this month as of Friday's close while Tata Consultancy Services falls 1.9 percent on outlook concerns.