Mumbai:Shares snapped a four-session winning run and eased 0.3% on Tuesday, as investors took profits amid concern accelerating inflation pressures could push up borrowing costs.
Lenders such as State Bank of India, ICICI Bank and HDFC Bank, all of which had posted spectacular gains in 2010, led the losers on talk the central bank will raise interest rates.
The Reserve Bank of India (RBI), which had raised rates six times in 2010 before pausing in December, is scheduled to review policy on 25 January.
Expectations for good quarterly earnings helped limit the drop in share prices.
“The market may form a top before earnings come in next week, which is generally the case when results are expected to be good. There may be some consolidation after the results,” said Arun Kejriwal, director of research firm KRIS.
The 30-share BSE index closed down 62.33 points at 20,498.72 with 18 of its components declining. The benchmark had risen 17.4% in 2010 on the back of record foreign portfolio investments of $29.3 billion.
The banking sector index dropped 2.5%, after rallying more than a third in 2010.
In the broader market, gainers and losers were nearly equal in number on relatively better volume of 445 million shares.
Top lender State Bank of India dropped 3.1%, while ICICI Bank and HDFC Bank shed 3.5% and nearly 2% respectively.
“The RBI has tough choices to make - tackling inflation and taking care of growth,” said Sunder Subramaniam, senior manager of institutional sales at brokerage Sharekhan.
“There are expectations building up that we could see an interest rate hike in some time. Also, bank stocks have performed well, and there is some profit booking.”
Maruti Suzuki, which sells every second new car in India, closed 0.1% higher after it joined peers in reporting strong December sales.
Its sales rose an annual 17% in December, usually a slower month, but were down 11.8% from November.
Energy major giant Reliance Industries climbed 2.1% in an attempt to catch up after it underperformed the Sensex with a nearly 3% decline in 2010.
Firm base metal prices pushed non-ferrous metals producer Sterlite Industries 0.6% higher.
Three-month copper on the London Metal Exchange was trading at $9,703 a tonne at 0752 GMT compared with $9,660 at the close on Friday, buoyed by positive manufacturing data from around the world.
Tata Steel, the world’s seventh-largest maker of the alloy, dropped 1.3% on concerns steel mills face higher costs after Australian coal mines were hit by flood.
Spot coking coal prices have risen around 10% in a month and look set to move sharply higher as Asia’s steel mills scour the globe for new suppliers to cover production lost to Australian floods.
The 50-share NSE index shed 0.2% to 6,146.35.
Suzlon Energy gained 2.6% to Rs 55.65 on heavy volume of 13.9 million shares, after television channel CNBC-TV18 reported that Spain’s Gamesa Corporacion Tecnologica was in talks with the Indian wind turbine maker to pick up a stake in the company.
Suzlon said the report was “both speculative in nature and inaccurate”.
MOIL Ltd and Jubilant Lifesciences rose 0.3% each after the Bombay Stock Exchange said it would add the stocks to the BSE-500 index from 10 January.
Textile firm SEL Manufacturing Co Ltd rose nearly 1% to Rs 25.45 after its board approved raising funds by issuing 20 million warrants on a preferential basis to its founders.