Indian shares falls

Indian shares dropped for the sixth straight session on Monday, with banking stocks leading the losses, as investors braced for another round of interest rate hike at the central bank's annual policy statement on Tuesday. Top lender State Bank of India fell 4 percent as Morgan Stanley downgraded it along with some other state-run banks, citing pressure on the lenders' net interest margins.
Shares in Infosys closed 0.6 percent higher, after the country's second-largest software services exporter announced top-level management changes linked to the pending retirement of its chairman, which analysts said removed uncertainties around the succession plan.
The RBI on Monday warned that persistently high inflation poses a risk to sustaining growth, reinforcing expectations that it will lift interest rates by at least 25 basis points on Tuesday. "If it is only 25 basis points, (it is) already discounted by the market. If it is something more than that, that would be negative for the markets," Agarwal said.
The 30-share main BSE index closed 0.72 percent, or 137.94 points lower at 18,998.02, with 22 of its components closing in the red. The 50-share NSE index fell 0.84 percent to 5,701.30 points. The main index has fallen in three out of the past four months this year and is down 7.4 percent on the year. It fell 1.6 percent in April.
Foreign funds, which had been net sellers in January and February, have bought a total of around $3.2 billion in the past two months. Headline inflation in India surged to nearly 9 percent in March, far above forecasts, adding pressure on the RBI to further tighten policy despite raising rates eight times since March 2010.
India's manufacturing sector maintained its strong rate of expansion in April, helped by higher output and employment, a survey showed on Monday, reinforcing expectations for more interest rate increases. Shares in other state-run lenders Canara Bank and Punjab National Bank dropped 5.2 percent and 2.8 percent, respectively. The banking sector index closed 2.1 percent lower.
Infosys gained 16.3 rupees to close at 2,922.55 rupees. Goldman Sachs said in a research note the uncertainty surrounding the management restructuring at Infosys was over, with the management now increasing its focus on executing the new strategy. Goldman, which has a "buy" on Infosys stock, said the company was best positioned for growth among its local peers. Shares in Maruti Suzuki slid 2 percent to 1,291.60 rupees, after the company posted its slowest pace of monthly sales growth in more than a year as rising interest rates dampened consumer demand.
Automobile sales growth in India is expected to slow to 12-15 percent this fiscal year, data from Society of Indian Automobile Manufacturers (SIAM), a trade body, showed. Auto sales grew a record 30 percent in 2010/11 to 1.98 million units. Reliance Industries, the country's most-valuable private firm and the heaviest stock in the main index, fell 1.9 percent to 964.75 rupees. In the broader market, there were more than two losers for every gainer, with about 488 million shares traded on the NSE.