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BENGALURU  -Indian shares closed nearly 2% lower on Monday, hurt by a selloff in information technology (IT) stocks, as increasing cases of the Omicron coronavirus variant spooked investors ahead of the central bank's decision on interest rates.

The blue-chip NSE Nifty 50 index slipped below the 17,000 mark and was down 1.65% at 16,912.25, while the benchmark S&P BSE Sensex was 1.65% lower at 56,742.35 at the closing bell.

Both indexes posted their lowest close since Aug. 27.

Most major sub-indexes ended lower, with IT, auto and pharma stocks falling the most, as India's tally of reported cases of the heavily mutated Omicron coronavirus variant rose to 12 on Sunday.

"Ambiguity surrounding Omicron continued to dent the morale of domestic investors ahead of the important Reserve Bank of India (RBI) policy announcement on Wednesday," said Vinod Nair, head of research at Geojit Financial Services.

"The domestic market is expected to be volatile as the near-term will be dominated by developments on new variant and policy decisions."

The three-day monetary policy committee meeting of India's central bank starts on Monday and investors will watch out for commentary from the central bank on future rate hikes.

According to a Reuters poll of economists, the RBI will hold rates at its December meeting and hike its reverse repo rate early next year and increase repo rate the following quarter.

The Nifty IT index which is up about 44% for the year, fell nearly 3% and marked its worst day in nearly two months. Index heavyweights Tata Consultancy Services and Infosys Ltd fell 2.9% and 2.3%, respectively.

The Nifty realty index gave up early gains to close 1.4% lower, while the Nifty auto index slipped 1.8%.