The BSE Sensex and Nifty retreated on Wednesday from record highs hit in the prior session, snapping a four-session winning streak as investors booked profits in blue-chips such as HDFC Bank ahead of the release election results on Friday.
Shares have surged on widespread expectations that the opposition Bharatiya Janata Party, and its prime minister candidate Narendra Modi, are set to win a majority in the elections when results are unveiled on Friday.
The Nifty has gained 21.50 percent since Sept. 13 when Modi was named as BJP's prime ministerial candidate, with foreign investors buying heavily.
Their net purchases accelerated over the previous three sessions, reaching a net 63.39 billion rupees ($1.06 billion) when including index futures.
"What we as investors in India crave is stability and certainty. A result north of 240 seats for Modi would likely deliver him the PM's office and a host of willing coalition partners - in other words a stable government," Jonathan Schiessl, Asian equities specialist at Ashburton Investments in Jersey, said in an email to Reuters.
"Much is hanging on this election result, not only for investors in the India story," Schiessl added.
The Sensex fell 0.24 percent, or 56.11 points, to end at 23,815.12 after hitting a record high of 24,068.94 on Tuesday.
The Nifty ended flat at 7,108.75, after touching an all-time high of 7,172.35 a day earlier.
Among blue-chips, HDFC Bank declined 1.6 percent after making a life high of 800 rupees on Tuesday, while Reliance Industries ended 1.7 percent lower.
Bharat Heavy Electricals slipped 1.2 percent after surging 10.2 percent on Tuesday, while Larsen & Toubro ended 1.1 percent lower.
Dr. Reddy's Laboratories Ltd dipped 3.5 percent adding to its 4.1 percent fall on Tuesday as the drugmaker continues to be hit by disappointment over its January-March earnings.
Nestle India Ltd fell 2 percent after the company reported lower-than-expected earnings in the January-March quarter.
However, state-run banks gained after a committee appointed by the Reserve Bank of India proposed on Tuesday the government should cut its stakes in state banks to below 50 percent.
State Bank of India rose 0.3 percent, Oriental Bank of Commerce Ltd gained 3.8 percent, Punjab National Bank rose 4.3 percent while Canara Bank surged 10.5 percent higher.
Tata Steel gained 5.9 percent, after earlier hitting its highest level since July 2012, ahead of its Jan-March results later in the day.