Sensex slips to one-month closing low; caution seen as FIIs sell index futures

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex fell for a third consecutive session on Tuesday to its lowest close in a month after lenders such as State Bank of India dropped on continued uncertainty over rate cuts and on caution as foreign investors sold index futures.

Foreign institutional investors (FIIs) sold 29 billion rupees worth of index futures in the last two trading sessions, indicating they are bracing for lower levels in the near term, dealers said.

They added this raised some concerns as FIIs were net sellers of 0.86 billion rupees of stocks on Monday and about 5 billion rupees on Friday, exchange and regulatory data showed.

 

FIIs have been a key support for markets after buying a net 15.27 billion rupees worth of shares this year as of Monday's close.

"FIIs are mainly booking profits out of long positions built in May series, consolidation till 5,800-5,850 level is possible on Nifty in near term," said Amit Gupta, head of derivatives at ICICI Direct.

The benchmark BSE Sensex fell 0.33 percent, or 64.70 points, to 19,545.78, marking its lowest close since April 30.

The broader NSE Nifty dropped 0.33 percent, or 19.85 points, to 5,919.45, falling for a third consecutive session.

The rupee's moves are also being closely watched as any further weakness is likely to trigger concerns about foreign fund outflows and raise issues about funding the current account deficit, traders said.

Global market tides have swept the rupee close to an all-time low, raising current account financing and inflation risks, but for now policymakers are more likely to use small-scale intervention and administrative measures to defend the currency.

State Bank of India fell 2 percent and HDFC Bank ended 0.9 percent lower on continued concerns over rate cut in the near future.

The economy grew 4.8 percent in the January-March quarter from a year earlier, in line with expectations and dashing hopes that a slower-than-expected growth would spark more aggressive rate cuts from the Reserve Bank of India.

Maruti Suzuki fell 1.4 percent, marking a third day of decline after the automaker's sales declined 14.4 percent in May compared with a year earlier.

Infosys fell 0.7 percent after a 4.3 percent rise on Monday on bets the return of founder and former chairman N.R. Narayana Murthy as executive chairman would improve the company's outlook was seen as overdone.

Shares in Shriram Transport Finance Company Ltd ended flat after falling as much as 2.7 percent after the Reserve Bank of India's clarifications on guidelines for bank licence applications were seen hurting its odds of potential approval.

However, shares in pharmaceutical companies rose due to factors such as value-buying and expectations that promoters may increase their stakes in some companies, dealers said.

Ranbaxy Laboratories Ltd gained 4.5 percent after a 17 percent fall in May after the company pleaded guilty to felony charges related to drug safety and agreed to pay $500 million in civil and criminal fines under a settlement with the U.S. Department of Justice.

Cipla Ltd advanced 2.1 percent as losses in the wake of lower-than-expected January-March earnings were seen as overdone.

Cadila Healthcare Ltd rose 5.2 percent ahead of its press conference on Wednesday.

Among other pharma stocks, Dr. Reddy's Laboratories Ltd rose 2.1 percent, Biocon Ltd gained 2.4 percent and Lupin Ltd ended 2.1 percent higher.

(Editing by Subhranshu Sahu)