The BSE Sensex fell on Friday to its lowest close in four weeks as lenders such as ICICI Bank were hit after stronger-than-expected GDP data dashed hopes for rate cuts next month, while Reliance Industries fell after Citigroup downgraded the stock.
India's gross domestic product grew 5.5 per cent in the April-June quarter, just above the 5.3 per cent posted in the three months ended in March and slightly higher than forecasts.
Although the data signalled the worst may be over, investors worry that growth will remain lethargic, but not low enough to prompt interest rate cuts from the Reserve Bank of India.
Continued disruptions in Parliament are also reducing the prospect of policy reforms during a time when the country is under threat of credit ratings downgrades from Standard & Poor's and Fitch Ratings.
Investors are now expected to focus on the Federal Reserve Chairman Ben Bernanke's speech later in the day amid hopes he will hit at resuming asset purchases. Potential action from the European Central Bank is also keenly anticipated.
The benchmark BSE index fell 0.92 per cent, falling to its lowest close since August 3.
The BSE Sensex fell 2.26 per cent for the week, after gaining in each of the previous four weeks, and ended up 0.8 per cent for the month. The 50-share NSE index fell 1.06 per cent on Friday.