BSE Sensex falls, banks hit ahead of RBI policy review

By Himank Sharma

MUMBAI (Reuters) - 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 RBI'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 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 central 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," V. Balasubramanian, Vice President and Fund Manager at IDBI Asset Management Ltd said.

Some clarity on how long the liquidity tightening measures would continue could provide support to the market, Balasubramanian added.

Balasubramanian said some 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 percent to 19,593.28, the lowest close since July 10. The index has fallen 3.5 percent over the last four sessions until Monday.

The Nifty closed down 0.93 percent at 5,831.65.

Hindustan Unilever shares fell 3.79 percent 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 percent and State Bank of India slipped 1.43 percent on Monday.

Lenders have been among the most hit this month, with the BSE's banking index down 10.9 percent so far this month, compared with a 1.02 percent gain in the Sensex.

Public sector lenders Allahabad Bank fell 4.55 percent, while Syndicate Bank lost 6.7 percent 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 percent and Jaiprakash Associates ended 4.68 percent lower -- both extending losses on disappointing numbers.

However, Wipro's shares surged as much as 6.83 percent, after the software services exporter issued dollar revenue guidance late on Friday that was above estimates.

Jet Airways rose 3.7 percent, gaining for a second day on hopes the Foreign Investment Promotion Board (FIPB) would approve a proposed sale of a 24 percent stake to Etihad Airways.

In a decision announced after market hours, the FIPB gave conditional approval to the Jet-Etihad deal. (Full story http://in.reuters.com/article/2013/07/29/jet-etihad-fipb-idINDEE96S08920130729)

(Reporting by Himank Sharma; Editing by Anand Basu)