Indian shares fell more than 1 percent on Thursday to snap a five-day winning streak as lenders such as HDFC Bank dropped on profit-taking, while sentiment also waned as the rupee reversed part of its recent gains.
Caution prevailed ahead of factory output and CPI data, scheduled for release later in the day even as foreign institutional investors remained net buyers of Indian shares, bringing their total to nearly 57.8 billion rupees over the previous five sessions.
The rupee also fell after five days of gains, even as India's central bank likely sold dollars via state-run banks starting at around 63.95 levels to prevent further weakness in the currency.
Dealers say the wholesale price inflation data and tempered expectations over the pace at which the U.S. Federal Reserve would withdraw its stimulus after its meeting next week was also seen weighing on the market.
"Macro data, Fed meet hold importance, but I see RBI policy on September 20 to be a silver lining amid the dark clouds," said Deven Choksey, managing director of KR Choksey Securities.
The benchmark BSE index fell 1.08 percent, or 215.57 points, to end at 19,781.88, retreating from their highest level in nearly 1-1/2 months in the previous session.
The broader NSE index fell 1.06 percent, or 62.45 points, to end at 5,850.70, closing below the psychologically important 5,900 level after gaining nearly 11 percent over the previous five sessions.
Among banks, private lenders ICICI Bank Ltd fell 1.9 percent, while HDFC Bank Ltd ended 2.1 percent lower mainly on profit-taking.
Wholesale-funded banks were hit more. Yes Bank Ltd slumped 7.4 percent, while Indusind Bank Ltd ended 5.4 percent lower.
Jaiprakash Associates Ltd slumped 11.6 percent after earlier rising as much as 2.1 percent on profit-taking. It agreed to sell its cement plant to UltraTech Cement Ltd on Wednesday.
Jaiprakash Associates' shares had risen about 27 percent in the previous five sessions in anticipation of such a sale, dealers said.
Shares of Tata Motors Ltd, India's largest automaker by revenue, fell 2.1 percent after the company said on Wednesday its global wholesale vehicle sales fell 16 percent on year in August, hit by a drop in passenger vehicle sales.
Oil and Natural Gas Corp Ltd fell 3.6 percent after India's oil secretary said India will decide on raising the retail prices of diesel and cooking gas in a few weeks, disappointing traders who were looking for an immediate decision.
Among the gainers, IDFC Ltd shares rose 2.8 percent after the Reserve Bank of India on Wednesday lifted restrictions placed on foreign investors purchasing the company's stock as their shareholding fell below the prescribed limit
Shares in Housing Development Finance Corp Ltd ended 0.3 percent higher after earlier falling as much as 2.3 percent as FTSE increased its "investability weight" to 100 percent from 74 percent in its global equity index series, as per its website.