Indian stocks closed sharply lower on Monday as markets pared exposure to risk ahead of a key inflation report due after the closing bell. The S&P/BSE Sensex dropped 0.8% to 71,925 and the NSE Nifty 50 fell 0.7% to 22,363, both hovering near two-year lows touched last week. Domestic bond yields surged during the session, as headline inflation is expected to accelerate to 5.4%, approaching the Reserve Bank of India's upper tolerance limit of 6%. The central bank raised interest rates last week and signaled it was open to further tightening. Yields were also pushed higher by suspected central bank intervention in foreign exchange markets to stabilize the rupee. Tech shares led the retreat, with Tech Mahindra and TCS falling 3.3% and 1.5%, respectively, while industrial heavyweights also booked losses.