Mumbai: Shares slid 0.4% on Thursday, with financials leading the decline ahead of weekly food and price data.
Investors have been bracing for an interest rate rise on Tuesday when the central bank is scheduled to review policy, to clamp down on inflation pressures.
“Issues like inflation are here to stay,” said Arun Kejriwal, director of research firm KRIS. “It does not look like FIIs’ interest is going to return back soon,” he said referring to foreign institutional investors.
A Reuters poll on Wednesday showed analysts expect the Reserve Bank of India to raise key rates by 25 basis points on 25 January, eschewing a bigger increase due to risks to industrial growth.
Foreign funds have sold a net of around $671 million of Indian equities since the start of this month after buying a record $29.3 billion in 2010.
By 11:15am, the 30-share BSE index was trading down 0.38% at 18,905.82 points, with two-third of its components declining. The 50-share NSE index or Nifty was down 0.3% at 5,672.35 points.
The banking sector index dropped 0.8%, taking losses since the end of December to 10.7%. State Bank of India, ICICI Bank and HDFC Bank fell between 0.5% and 1.2%.
Parag Doctor, a technical analyst at brokerage Motilal Oswal, said there was long-term support for the index at its 200-day moving average of around 5,600 points and there would be resistance at 5,750.
Top-listed biotechnology firm Biocon rose as much as 3.4%, after a 25% rise in its December-quarter net profit.
Software stocks climbed and lifted the IT sector index 0.7%, after falling 1.2% in the previous session.
Tata Consultancy, Infosys Technologies and Wipro rose between 0.6% and 1.9%.
In the broader market, losers almost equaled the number of gainers on volume of 87 million shares.
The MSCI’s measure of Asian markets other than Japan and Japan’s Nikkei were down 1.3% each.
Private-sector lenders Kotak Mahindra Bank and Yes Bank were up 1.2% and 1.6% respectively ahead of their quarterly earnings.
SKS Microfinance rose 9.2% to Rs 730, after the central bank temporarily relaxed rules for bank loans to the microfinance sector, and set out proposed guidelines for lenders to the poor.