India's broader NSE index fell for a second consecutive session on Tuesday, marking its biggest fall since March 3, as interest-rate sensitive shares such as Housing Development Finance Corp fell after wholesale inflation accelerated more than expected.
The wholesale price index (WPI) in March rose a much faster-than-expected 5.70 percent from a year earlier, marking a three-month high and coming well above the 5.30 percent increase forecast by economists.
Concerns that a rally that sent indexes to record highs last week may have been overdone also weighed, especially as Asian shares were hit by data showing China's money supply growing at the weakest pace in more than a decade.
Foreign institutional investors, who have pumped in $4.8 billion so far in 2014, became net sellers worth 3.63 billion rupees ($60.3 million) on Friday for the first time since March 10. Markets were closed on Monday for a holiday.
"With the Nifty seeing a one-sided rally for the last several weeks, investors may continue to book partial profits too. In the coming sessions, fourth quarter results, election outcome and global cues will have a major impact on the market trend," said by Rakesh Goyal, Senior Vice President, Bonanza Portfolio Ltd.
"However, despite selling pressure, Nifty is seen holding above the 6700 level well, which shows optimism in the near term. The index can be seen trading in a compact range of 6650-6820 for the last few trading sessions," he added.
The benchmark BSE index closed 0.64 percent lower at 22,484.93, while the broader NSE index also ended down 0.64 percent at 6,733.10.
Interest rate-sensitive shares such as those of banks and real estate companies fell after the surprisingly strong wholesale price inflation.
These sectors had surged on anticipation the Reserve Bank of India would hold off on further interest rate hikes after tightening monetary policy by 75 basis points since September.
Housing Development Finance Corp. fell 3.39 percent, while DLF Ltd lost 5.8 percent and Unitech closed 2.1 percent lower.
Among banks, State Bank of India ended down 1.5 percent.
Investors took profit across a range of blue chips. Hindalco Industries fell 4.73 percent, while Tata Motors , which had gained 6.3 percent so far this month, was down 2.4 percent.
However, Infosys Ltd rose 0.76 percent after posting a stronger-than-expected 25 percent increase in net profit.
Other IT outsourcing companies also rose, with Tata Consultancy Services gaining 4.1 percent and Wipro closing 3.6 percent higher.
Shares in United Spirits Ltd rose as much as 15 percent to a record high of 2,940.80 rupees after Diageo Plc announced a tender offer to acquire up to an additional 26 percent stake in the Indian firm at 3,030 rupees a share. The offer will be launched in June.
Shares in the spirits maker ended up 11.6 percent.
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FACTORS TO WATCH
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* Brent drops below $109 as investors weigh Ukraine, Libiya
* Shares dip on concerns over Ukraine, Chinese growth
* Foreign institutional investor flows
* For closing rates of Indian ADRs