(Corrects BSE and NSE percentage falls in the first bullet
point, and NSE percentage fall in para 10)
* BSE falls 0.92 pct; NSE falls 1.06 pct
* Stronger-than-expected GDP dashes hopes for rate cuts
* Caution ahead of Bernanke's speech in Jackson Hole
By Abhishek Vishnoi
MUMBAI, Aug 31 (Reuters) - Indian shares fell on Friday to
their 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 percent in the
April-June quarter, just above the 5.3 percent 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.
"Rate cut is unlikely in September meeting of RBI," said R.K
Gupta, Managing director of Taurus Mutual Fund.
"Market is now concerned on whether there would be a ratings
downgrade of India and how would foreign investors react to it,"
India's benchmark BSE index fell 0.92 percent,
falling to its lowest close since Aug. 3.
The BSE index fell 2.26 percent for the week, after gaining
in each of the previous four weeks, and ended up 0.8 percent for
The 50-share NSE index fell 1.06 percent on Friday.
Lenders were among the leading decliners. ICICI Bank
fell 1.9 percent and Axis Bank lost 2.1
UBS downgraded Axis Bank to "neutral" from "buy",
citing "increasing" quality risks, "muted" earnings growth and a
28 percent share price increase so far this year.
Public sector banks also edged lower, though they did turn
positive at one point after the farming sub-index within the
April-June GDP data grew more strongly than expected.
However, the prospect of reduced non-performing assets from
rural areas was not enough to keep shares afloat in a down
market. State Bank of India fell 0.13 percent, while
Bank of India retreated 0.6 percent.
Reliance Industries fell 2.2 percent after
Citigroup downgraded the stock to "neutral" from "buy", saying
valuations were "not compelling enough" while the near-term
earnings outlook was muted.
Shares of the energy conglomerate had a good run in August,
but started to slide towards the second half. Reliance shares
still posted a 3.1 percent gain for the month.
Software services exporters fell as worries intensified
pricing power in the sector would be hit by rising competition
and a weaker global outlook.
Infosys fell 1.3 percent, with shares faltering in
the last week of August after strong gains earlier in the month
that sent shares up 6 percent.
Hero MotoCorp fell 3.3 percent, marking its fifth
day of falls on continued worries about a potential slowdown for
two-wheeler demand and a pileup of inventory.
However, Bharti Airtel rose 2 percent ahead of its
annual general meeting next week on hopes for more details about
the wireless service provider's plan to list its telecoms masts
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FACTORS TO WATCH
* Euro rises to session high versus dollar
* Oil up to $113, heads for 2nd monthly gain
* Shares, euro turn higher as Bernanke speech looms
* Foreign institutional investor flows
* For closing rates of Indian ADRs
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