The BSE Sensex fell on Thursday, snapping four sessions of gains after Reliance Industries was hit by profit-booking, while SBI's cut in some loan rates for new borrowers sparked worries other lenders would follow suit, hitting margins in the sector.
Shares also tracked weaker Asian shares after the Federal Reserve refrained from introducing new U.S. monetary stimulus measures, while doubts grew about whether the European Central Bank would announce measures to support the euro zone later in the day.
Lack of meaningful action on either side of the Atlantic could dent demand for global risk assets at a time when investors in India remain troubled by signs of weak rainfalls during the monsoon season.
Rains remained below average in the week to August 1, the weather office said on Thursday, extending worries about food inflation and lower rural consumption.
"By now it is pretty clear that overall monsoons are way below normal, and definitely this will put further pressure on our domestic macros," said Kaushik Dani, a fund manager at Peerless Mutual Fund.
"Going forward focus is now on how industrial growth numbers are coming and how inflation will plan up."
The 30-share BSE Sensex fell 0.19% to 17,224.36 points.
The 50-share Nifty fell 0.24% to end at 5,227.75 points.
Volumes in the more actively traded NSE index were the lowest since July 20, while the volumes on the NSE futures and option markets slumped to their lowest in two years.
Among decliners on Thursday, Reliance Industries fell 1%, after shares of the energy conglomerate rallied 5.2% over the previous four sessions, trumping the gains in the broader indexes.
State Bank of India fell 1.1% after India's biggest lender cut auto loans to 10.75% from 11.25%, while cutting home loans to a range of 10.25% to 10.4% for new borrowers.
SBI's shares fell despite assurances from officials the impact on margins would be small, while the upside from credit growth would be positive.
"Impact on margin will be minimal," Atanu Sen, deputy managing director at SBI, told reporters at a news conference.
"Margins will improve because liquidity is there with the bank. The growth in credit will be slow, we won't see a big growth overnight. The impact will be positive but not dramatic," he added."
Other lenders fell on worries they would have to match SBI's cut in loans. Private lender HDFC Bank lost 0.7%.
Fears of the potential inflationary impact from weak rainfalls during the monsoon season also hit banks, traders said.
Companies that rely on rural consumers also retreated, with tractor maker Mahindra & Mahindra down 0.5%.
Shares in Deccan Chronicle Holdings fell 4.7% to a record low of 13.30 rupees, falling for a 10th consecutive session, even after its chairman sought to assure markets the company had enough assets to face what he called a "liquidity crisis.
NIIT Technologies fell 5.15% after the company said two key stakeholders had sold a 7.4% stake in the small provider of software training and education services.
However, among gainers, shares in state-run NTPC Ltd rallied 3.8% after Coal India's agreement this week to supply 80% of the coal needed to fuel new power projects eased concerns about supply.
Shares in engines maker Cummins India Ltd surged 6.9% to 466.75 rupees after the company said April-June net profit rose 2.3% to a better-than-expected 1.81 billion rupees net profit.
Top Section
Explore Business Standard