The BSE Sensex fell for a fourth consecutive session on Monday to its lowest in more than two weeks as Hindustan Unilever dropped after brokerage downgrades, while interest rate-sensitive stocks fell ahead of the central bank's policy review.
Shares have given up most of their gains this month, led by a sell-off in lenders, since the Reserve Bank of India (RBI) unveiled measures to defend the rupee by draining cash, with initial measures on July 15 followed by additional steps last week.
Investors are on hold for the RBI's policy review on Tuesday. Although the apex bank is not expected to raise the key repo rate or the cash reserve ratio, it could provide additional cues about its liquidity tightening measures.
"We should know what is in store for us for the next few months," said V Balasubramanian, vice president and fund manager at IDBI Asset Management Ltd.
Some clarity on how long the liquidity tightening measures would continue could provide support to the market, he added.
Mr Balasubramanian said if there is some clarity on how long this liquidity tightening will continue, that could provide some support to the market.
The Sensex fell 0.78 per cent to 19,593.28, the lowest close since July 10. The index has fallen 3.5 per cent over the last four sessions until Monday.
The Nifty closed down 0.93 per cent at 5,831.65.
Hindustan Unilever shares fell 3.79 per cent after J.P. Morgan and Macquarie downgraded its stock, citing slowing sales growth and limited upside to share prices after recent strong gains.
Lenders extended recent falls ahead of the RBI's policy review. HDFC Bank declined 1.8 per cent and State Bank of India slipped 1.43 per cent on Monday.
Lenders have been among the most hit this month, with the BSE's banking index down 10.9 per cent so far this month, compared with a 1.02 per cent gain in the Sensex.
Public sector lenders Allahabad Bank fell 4.55 per cent, while Syndicate Bank lost 6.7 per cent after reporting higher non-performing assets in the April-June quarter, worrying investors that slowing economic growth would lead to an increase in loan defaults.
Among other stocks that reported earnings, Bharti Infratel Ltd fell 3.36 per cent and Jaiprakash Associates ended 4.68 per cent lower - both extending losses on disappointing numbers.
However, Wipro's shares surged as much as 6.83 per cent, after the software services exporter issued dollar revenue guidance late on Friday that was above estimates.
Jet Airways rose 3.7 per cent, gaining for a second day on hopes the Foreign Investment Promotion Board (FIPB) would approve a proposed sale of a 24 per cent stake to Etihad Airways.
The FIPB was due to consider the deal at a meeting on Monday.
Copyright @ Thomson Reuters 2013