Industrial output likely shrank 0.5 percent in October from the same month a year earlier, its first decline in over two years as export growth slowed, a Reuters poll showed.

Last week, the Times of India newspaper quoted an unnamed source as saying factory output fell 7 percent in October, dragged down by a drop in the capital goods sector.

At 10:05 a.m. (0435 GMT), the benchmark 10-year bond yield was up 1 basis point at 8.54 percent.

Total volume on the central bank's electronic trading platform was 13.80 billion rupees ($264.4 million), lower than the average 20 billion to 30 billion rupees.

Speculation the central bank may announce an unscheduled bond auction this week kept traders wary, said Anoop Verma, an associate vice president with Development Credit Bank.

"Domestic concerns are overriding overseas cues," he said. The government, which has been borrowing about 130 billion rupees through bond auctions every week, has not scheduled any sales this week ahead of the central bank's policy meeting on Friday.

The Reserve Bank of India is widely expected to pause its rate increasing cycle that started in early 2010 and announce measures to boost liquidity and support growth.

Headline inflation data for November, due on Wednesday, is expected to show a drop to 9.04 percent from 9.73 percent the month before as food prices fell to their lowest in nearly three-and-a-half years, a Reuters poll showed.

Traders expect the 10-year yield to move in a 8.50 percent to 8.60 percent range.

The benchmark five-year swap was steady at 7.07 percent and the one-year rate was up 1 basis point at 7.80 percent.

India cut its full-year growth forecast on Friday amid slowing domestic and global demand, with officials warning the government was facing a serious balance of trade problem and will have a tough time meeting its fiscal deficit target.