Markets fall most in 5 weeks

Indices fall more than 1.3% each

Indian markets on Monday posted their biggest single-day drop since February 23, as the dollar continued to gain against most global currencies, triggering speculation that the US Federal Reserve might raise rates at its next meeting.

Domestic markets, which resumed trading after a four-day weekend, saw profit-taking ahead of expiry of derivative contracts on Thursday, following sharp gains this month.

The benchmark Sensex fell 371 points, or 1.5 per cent to end at 24,966, with all but three of its components ending with losses. The Nifty 50 lost 101 points, or 1.3 per cent, to close at 7,615.

Despite the correction, foreign investors were net buyers of Rs 2,043 crore, while domestic investors sold shares worth Rs 2,495 crore on Monday, provisional data showed.

"Participants were in profit-taking mood, tracking mixed global cues and weakness in rupee against the dollar," said Jayant Manglik, president, retail distribution, Religare Securities. "We see this fall as normal profit-taking after a substantial rise of over 10 per cent in a month and repeat our buy-on-correction advice," he said. The rupee fell to as much as 66.87 compared to dollar but recovered later and ended at 66.57 compared to the previous close of 66.64 against the dollar.

Indian markets are up more than nine per cent so far this month and are headed for the biggest monthly advance since October 2013. Many markets across Asia and Europe remained closed due to holidays.

Markets are expected to remain volatile as investors watch US economic data and speeches from Fed officials, which may provide clues on future interest rate increases. The expiry of March series derivative contracts on Thursday and the financial year ending soon, are likely to hit market performance this week, say analysts.

Dipen Shah, senior vice-president and head of private client group research, Kotak Securities, said investors were eyeing the Reserve Bank of India (RBI) policy meeting next week and March quarter earnings season.

"We will watch legislative action in the second half of the Budget session, which will have important implications for the market," he said.

Rate-sensitive stocks in realty and banking sectors, along with metal shares, were the biggest losers on Monday. Most recent outperformers including Vendata and Hindalco fell nine per cent each. Index heavyweights State Bank of India and ICICI Bank fell four per cent each. BSE realty and metal indices fell four per cent each.

After a sharp nine per cent rally this month, Sensex is now trading at a price-to-earnings multiple of 15.2 times, highest this year. The rally has been spurred by foreign inflows of $2.5 billion.