Indian benchmark indices, Sensex and Nifty, closed lower on Monday, dragged down by IT stocks amid concerns over potential US rate cuts. The decline followed a record high open, as markets paused after a strong post-election results rally.

The NSE Nifty 50 index shed 0.13 per cent to 23,259.20, while the S&P BSE Sensex settled 0.27 per cent lower at 76,490.08. Despite opening with gains of about 0.5 per cent, both indices surrendered their early highs.

Of the 13 major sectors, seven advanced on the day.

Last week, the Nifty surged 3.4 per cent and hit a record high on Friday, rebounding from a slump earlier in the week after Prime Minister Narendra Modi's alliance secured a narrower victory than anticipated in the general elections.

Samrat Dasgupta, CEO of Esquire Capital Advisors, commented, "Markets are taking a breather; we saw a spectacular rally last week, with the Nifty 50 closing about 2,000 points higher from Tuesday's low, which no one expected."

State-owned lenders and state-run firms saw gains of 0.71 per cent and 0.43 per cent, respectively. Analysts at Nomura highlighted the weekend's union cabinet composition as indicative of policy continuity, leading brokerages to maintain an "overweight" rating on financials, infrastructure, and oil and gas stocks.

Energy and infrastructure stocks climbed around 0.6 per cent each.

On the other hand, IT firms, which rely significantly on US revenue, suffered a 1.83 per cent loss after strong US jobs data raised concerns about potential delays in Federal Reserve rate cuts.

In the broader market, small-caps rose by 1.51 per cent, while mid-caps remained relatively unchanged. Data revealed higher inflows into small-cap mutual funds compared to mid, large, and multi-cap funds in May.

Samrat Dasgupta noted, "Segments in the small-cap end of the market are not so liquid. More money is chasing a limited amount of stocks," stressing on ongoing valuation concerns in the broader markets.

(With Reuters inputs)