mumbai 07 13, 2012, 17:40 IST
The BSE Sensex fell for a third consecutive session on Friday as banks and property stocks retreated ahead of inflation data on Monday, which will help set expectations ahead of the RBI policy review later this month.
A Reuters poll forecasts wholesale price inflation likely rose by 7.62 percent in June from a year ago, the highest this year. However, a lower-than-expected number would raise hopes for a rate cut from the Reserve Bank of India on July 31.
Earnings will also be key next week, with Reliance Industries among the blue chips posting results, while the presidential elections on Friday has been earmarked by investors as the potential start of meaningful policy reforms.
Though the post of president in India is largely ceremonial, investors hope the polls will help align the government coalition in pushing for measures such as raising diesel prices and opening up the retail sector for foreign investment.
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"Til presidential election, markets would be sideways, but post that, there should be a significant recovery," said G. Chokkalingam, Chief Investment Officer, Centrum Wealth Management.
"Post presidential election, government would announce FDI in aviation and multi-brand retail. Pending bills, namely of insurance, pension and banking, will also get traction in parliament."
The 30-share BSE index fell 0.11 percent to 17,213.70 points, falling 1.75 percent for the week, its biggest weekly fall since May 5.
The 50-share Nifty also lost 0.15 percent to end at 5,227.25 points.
Despite the falls, foreign investors have bought a net 15.4 billion rupees in Indian stocks this week as of Thursday, according to regulatory data, bringing their total in July to around 73.12 billion rupees.
Lenders and property stocks were among the day's top decliners ahead of the inflation data on Monday.
State Bank of India fell 1.92 percent, while DLF , India's biggest real estate firm, fell 1.23 percent.
Among other decliners, SKS Microfinance fell 7.04 percent after the microfinance lender sold a stake to an investor at a steep discount to current share prices.
Infosys fell 1.5 percent, after already falling 8.4 percent on Thursday, when the software services exporter sharply cut its revenue forecast for the fiscal year ending in March 2013.
A raft of brokerages cut Infosys' target price on Friday. Barclays Capital cut its ratings to "equal weight" from "overweight", saying the company's guidance was still too aggressive.
By contrast, larger rival Tata Consultancy Services rose 1.1 percent after its April-June earnings -- which were also out on Thursday -- beat forecasts.
Brokerages raised their target price on the stock, though Kotak Institutional Equities was a dissenter, cutting TCS to 'reduce' from 'add', citing concerns about valuations and profitability in the industry.
Not all banks fell on Friday. HDFC Bank shares rose 1.2 percent after India's third-biggest lender reported a forecast-beating 30.6 percent rise in quarterly profit.
Shares in Development Credit Bank rose 3.5 percent on expectations for better-than-expected April-June earnings on Saturday, institutional dealers said.