North Korea on Sunday conducted its sixth and most powerful nuclear test, which it said was of an advanced hydrogen bomb for a long-range missile, marking a dramatic escalation of the regime's stand-off with the United States and its allies.
Japan's Nikkei closed about 1 percent lower, while MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.8 percent.
"The markets are struggling to go up because of North Korea tensions," said Deven Choksey, promoter, KR Choksey.
The broader Nifty was down 1.12 percent at 9,862.35 as of 12.20 pm, while the benchmark Sensex was 1.01 percent lower at 31,567.77.
Technical charts showed the NSE index broke out of a triangle formation last week, suggesting consolidation was complete and a rally might resume.
"Banking stocks such as HDFC Bank are a bit highly valued and are seeing some corrections," Choksey said.
HDFC Bank Ltd and Housing Development Finance Corp Ltd were down for a second straight session, trading 0.9 percent and 0.7 percent lower respectively.
The Nifty Auto index fell 0.8 percent after gaining nearly 2 percent on Friday when most automakers reported August sales numbers. Hero MotoCorp Ltd, which reported a 10 percent rise in sales, was trading 1.6 percent lower.
Meanwhile, Coal India Ltd surged as much as 2.9 percent after the miner said on Friday that the company along with its units produced 37.63 million tonnes of coal in August, beating its target of 36.96 million tonnes.