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Indian stocks closed lower on Monday as an extended rally in financial stocks on the central bank's record dividend last week was offset by a drop in energy firms, with volatility remaining high on nerves around elections results.

The blue-chip NSE Nifty 50 closed 0.11% lower, while the S&P BSE Sensex settled 0.03% lower at 75,390.50 points. Both the benchmarks rose about 0.7% each and hit record highs earlier in the session.

Heavyweight financial stocks ended 0.52% higher, extending its rally from last week on positive investor sentiment post the Reserve Bank of India's record dividend to the government.

Analysts believe that the dividend payout can help the government reduce its fiscal deficit.

The Nifty Bank Index, state-run lenders and private banks also added 0.6%-1.33% to be among top sectoral gainers. Energy stocks, however, dropped 0.82% as investors curiously await the OPEC+ meeting later in the week, which could have a near-term impact on oil prices. [O/R]

Meanwhile, volatility in the country's stock markets remained elevated as reports of lower voter turnout in the elections and voter fatigue fan doubts about the margin of victory for the ruling party when the results are announced on June 4.

The volatility index rose to its highest level since nearly 2 years.

"This would be last week where we await the outcome of the national general elections so volatility will continue to remain at elevated levels ... due to nervousness about the outcome," said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.

Among individual stocks, Adani Ports rose 1.1% while Wipro dropped 2.42% on news that Adani Ports will replace Wipro in the 30-stock Sensex index, effective June 24.

Wipro was the top percent loser on Nifty 50.