Shares extend losses after the Dravida Munnetra Kazhagam (DMK) party pulled out of the ruling coalition on Tuesday, raising doubts about the fate of government's reforms.
The BSE index is down 0.3% while the NSE index is 0.42% lower.
Banking stocks extend losses on continued disappointment as investors were disappointed on Tuesday after the RBI left CRR unchanged and also raised doubts about future rate cuts.
Asian shares were trading lower after a bailout plan for Cyprus fell into disarray, but losses were limited on investors' hopes that a last minute deal was still within reach.
ICICI Bank Ltd fell 0.7% and HDFC Bank Ltd is down 0.76%.
Hindustan Unilever Ltd shares gained 1.1% after UBS upgraded it to "buy" from "neutral" citing expectations of a "strong" business outlook and the prospect of rising volumes for its products.