Tight liquidity continues to be the primary concern among bond dealers, with the cash deficit rising above 1 trillion rupees for a fifth successive session.

That has sparked hopes the central bank will step in to buy bonds via open market operations (OMO) as part of its stated stance to proactively manage liquidity. An announcement could come as early as Tuesday, as has been typical in previous instances.

"If the RBI does do an OMO this week, it will provide a guidance to the market as to what would be the RBI's tolerance level of liquidity deficit," said Harish Agarwal, a dealer with First Rand Bank.

He expects the 10-year yield to ease to 8.15 percent if the central bank announces an OMO.

The benchmark 10-year bond yield rose 1 basis point to 8.20 percent, having traded in a narrow 8.19-8.20 percent band.

Total volume on the central bank's electronic trading platform was at a low 114.85 billion rupees compared with the usual 160-200 billion rupees.

The winter session of parliament is set to begin on Thursday, with legislation expected to be debated including opening up the pension sector and hiking the existing limit in insurance for foreign investors.

Investors are also tracking whether the government will raise foreign investment limits, with a senior finance ministry official saying a proposal was being considered to raise government and corporate bond limits by $5 billion each.

India's capital market regulator will auction 10.94 billion rupees of government bond limits under the unrestricted category as well as 44.51 billion rupees under the long-term debt category later on Tuesday.

Tight cash conditions kept overnight index swaps elevated, with the benchmark 5-year OIS rate ending up 2 bps at 7.17 percent, and the 1-year OIS rate rising 2 bps to 7.76 percent.