BENGALURU, Feb 26 (Reuters) - Indian shares were subdued on Monday, weighed by IT stocks and a drop in Asian Paints on concerns over increasing competition and as investors likely booked profits after a record-breaking run last week.

As of 10:19 a.m. IST, the blue-chip index NSE Nifty 50 was down 0.36% to 22,133.20, after hitting record highs in each of the five sessions last week.

The BSE Sensex shed 0.40% to 72,852.46.

The broader, more domestically-focussed small-caps were flat, while mid-caps shed 0.5%.

"Markets are worried about valuations, which is leading to occasional profit booking," said Avinnash Gorakshakar, head of research at Profitmart Securities.

"Otherwise, the construct remains positive for domestic equities, with steady retail inflow and corporate growth visibility as seen from the December quarter results."

Gorakshakar expects the Nifty and Sensex to continue to scale new highs between now and national election results in May 2024, with expectations of policy continuity aiding sentiment.

IT stocks dropped 1.25%, ahead of a key U.S. inflation reading later in the week, which could influence the Federal Reserve's future rate trajectory. IT companies earn a significant share of their revenue from the U.S.

If U.S. inflation remains elevated, it will force the Fed to switch back to a more hawkish policy stance, which will weigh on IT stocks, said analysts at Systematix Institutional Equities.

Asian markets were subdued, ahead of key inflation readings, including from Japan and Europe, later in the week.

Among stocks, Asian Paints lost about 4%, the most on the Nifty 50 and continuing its decline since Grasim launched its paints business.

Meanwhile, Paytm jumped an exchange-allowed maximum of 5% after regulators took steps that could ensure the embattled fintech's would continue processing digital payments. (Reporting by Bharath Rajeswaran in Bengaluru; Editing by Savio D'Souza)