Indian government bond yields were lower on Wednesday on value buying following a strong drop in prices in the previous session after Prime Minister Narendra Modi secured a smaller victory margin in his third term.

India's benchmark 10-year yield ended at 7.0272%, following its previous close at 7.0382%.

"There was some value buying after yesterday's sharp fall in prices," said Yogesh Kalinge, vice president at A.K. Capital Services.

"The market is also a little less anxious after statements from alliance partners in support of the Bhartiya Janata Party (BJP). However, the uncertainty will remain till the new government is sworn in."

While the ruling BJP won 240 seats, short of a simple majority in the 543-member house, candidates of the party-led National Democratic Alliance (NDA) were winners in 293 seats, surpassing the 272-mark needed to form the government.

Modi is expected to be sworn in for a record-equalling third term on June 8, after key allies pledged their support.

A weakened mandate for the ruling BJP-led NDA has raised concerns about a potentially slower pace of fiscal consolidation alongside increased welfare spending.

However, despite the post-election policy uncertainty, India's government bonds will continue to attract foreign flows, fund managers said.

Foreign investors have piled on bonds this year and remained on the buying side on Tuesday, despite the unexpected election outcome hitting stocks, bonds and the local currency on concerns over populist spending and a stalling of reforms.

Traders will now focus on the Reserve Bank of India's monetary policy decision due on Friday, wherein a majority of the market participants expect a status quo on rates and stance amid robust economic growth and an uncertain inflation outlook.

MUFG Bank has pushed its call for the first repo rate cut by the RBI by a quarter to January-March after the election result.

(Reporting by Bhakti Tambe; Editing by Sohini Goswami)