The BSE Sensex closed 0.7 percent lower on Wednesday, as broker downgrades dragged the largest listed firm Reliance Industries<RELI.BO>, on concerns it would take the firm longer to increase gas production at the KG-D6 block, off the east coast.
Energy giant Reliance Industries (RIL), which has the heaviest weight on the main index, shed 3.1 percent, the most in nearly two months, as investors ignored a 32-percent rise in net profit and focused on gas production concerns and lower-than-expected gross refining margins (GRMs).
Brokerages including Edelweiss, Motilal Oswal and IIFL downgraded RIL.
"...we are negatively surprised by RIL's guidance to maintain gas production at 60 mmscmd (million standard cubic metres of gas a day) for the next 9-12 months and the company's lower-than-expected Q1FY11 GRMs," Edelweiss said in a note.
The 30-share BSE index dropped 0.67 percent or 120.24 points to 17,957.37, with 17 of its components closing in the red.
The benchmark lagged MSCI's measure of world markets which firmed 0.1 percent at 1026 GMT and its measure of Asian shares other than Japan which was barely changed.
The BSE index is up 2.8 percent so far in 2010, supported by foreign buying of $9.1 billion of stocks. A part of this investment was absorbed by primary market issuance.
Foreign funds have pumped in a record $17.5 billion in 2009, fuelling a rally of 81 percent.
"Weakness in Reliance pulled the market lower today," said Deven Choksey, managing director and CEO of KR Choksey Shares.
"The key indices are going to be rangebound for now, as there is not much headroom left for most of their constituents."
Choksey said it is a stock-pickers' market with buying opportunities seen in the mid-cap space and select large cap stocks.
Top utility vehicle maker Mahindra & Mahindra<MAHM.BO> rose 0.7 percent after it reported a forecast-beating 40 percent rise in quarterly net profit. It said rising inflation and hardening interest rates remain a concern, but was confident of meeting the challenges.
Top-listed real estate firm DLF shed 2.4 percent ahead of its June quarter results due after market hours.
Financials closed mixed after a new Reuters poll showed the central bank was likely to raise rates more aggressively in the rest of the fiscal year, after tightening policy more than expected on Tuesday.
Top lender State Bank of India rose 1.5 percent while rival ICICI Bank shed 1.6 percent.
Private-sector lender HDFC Bank firmed 1 percent and mortgage lender Housing Development Finance Corp dropped 1.5 percent.
Declining shares outpaced gainers in a ratio of 1.4:1 in the broader market. Volume was relatively low, with 341 million shares changing hands on the BSE.
The 50-share NSE index declined 0.6 percent to 5,397.55 points.
"Technically, we have said earlier that short-term indicators have neared their overbought levels and this has caused some weakness to seep in. The day's closing too has been in the lower band of its Bollinger band," Pinc Research said.
"Weekly charts have just started suggesting sustainable strength. This would mean that the index may undergo a short-term halt or correction, but the overall trend remains in a sound condition."
STOCKS THAT MOVED
* Top engineering and construction firm Larsen & Toubro extended Tuesday's losses and dropped 2.1 percent to 1,824.80 rupees, a day after it reported a 58-percent drop in its quarterly net profit.
* Aban Offshore jumped 8.9 percent to 898.15 rupees, after the offshore drilling services provider said reinsurers have settled a claim worth $235 million for its semi-submersible rig, which sank in the Caribbean Sea.
* Cairn India dropped 0.7 percent to 328.90 rupees after the oil explorer's quarterly net profit at 2.81 billion rupees lagged street view of 4.98 billion.
* HT Media Ltd rose 2.7 percent to 158.40 rupees after the publisher of newspapers, journals and periodicals posted a 44-percent jump in quarterly profit.
MAIN TOP THREE BY VOLUME
* Aster Silicates on 36.5 million shares
* Spicejet on 11.5 million shares
* Shree Ashtavinayak on 10.8 million shares
(Editing by Malini Menon)
(For more business news on Reuters India click http://in.reuters.com)
