The Sensex falls 0.1 percent, while the Nifty is down 0.26 percent, despite lower-than-expected wholesale inflation data on caution ahead of the presentation of the 2013/14 budget at the end of the month.
India's annual wholesale price inflation slowed to 6.62 percent in January, government data showed on Thursday, lower than 7 percent expected in a Reuters poll of economists.
Shares briefly turned positive after the WPI data, but traders say the Reserve Bank of India will also factor in the persistent current account deficit into its monetary policy decisions, making the outlook of rate cuts in the rest of the year still uncertain.
State Bank of India shares fall 1.3 percent ahead of earnings due later in the day.
Tata Motors Ltd falls 2.25 percent on fears that third-quarter results may miss estimates.
However, software services exporters extend Wednesday's gains on hopes for improved earnings in fiscal 2014. Infosys Ltd shares gain 1 percent, while Tata Consultancy Services Ltd is up 1.1 percent after earlier hitting a new all-time high.