Indian shares fell 0.2 percent in a volatile session on Tuesday, with investors uneasy ahead of the central bank's policy statement next week when it is widely expected to raise interest rates again as it continues its battle with inflation. The Reserve Bank of India is seen raising rates by a quarter point on May 3 and analysts now expect it to raise rates by a total of 75 basis points for the rest of 2011, or 25 basis points more than they expected in mid-March, a new Reuters poll found.
The central bank has raised rates eight times over 12 months but inflation in March was nearly 9 percent, well above the RBI's projection. Financials closed mixed, while cement makers rallied after robust quarterly results. The 30-share BSE index shed 38.96 points to 19,545.35 points, with two-third of its components closing in the red. The 50-share NSE index slipped 0.1 percent to 5,868.40 points.
Losers outnumbered gainers in the ratio of 1.4:1, while 656 million shares changed hands on the NSE, higher than the 90-day average daily volume of 649 million shares "Trade is volatile because we have expiry coming up," said Arun Kejriwal, director of research firm KRIS, referring to the expiry of monthly derivative contracts on NSE on Thursday. "Investors are cautious ahead of RBI policy next week." The widening corruption probe also weighed, traders said.
On Monday, the police arrested the former chief organiser of the Delhi Commonwealth Games and the daughter of a key ally in Prime Minister Manmohan Singh's government was among those charged with taking bribes in a multi-billion dollar telecoms licensing scandal. The benchmark BSE index is down 4.7 percent year-to-date. However, it has gained 9.7 percent since the end of February thanks to net foreign fund inflows of $3.7 billion in the period. Private lender HDFC Bank and mortgage lender Housing Development Finance Corp dropped 1.3 percent and 1 percent, respectively.
Leading lenders State Bank of India and ICICI Bank rose 0.4 percent each. Cement makers - ACC and UltraTech Cement rallied 1.2 percent and 2.3 percent, respectively, after reporting forecast-beating quarterly earnings. Rival Ambuja Cements rose 1.5 percent ahead of its results. Energy major Reliance Industries extended Monday's losses and shed 0.8 percent. Last week it posted a record quarterly net profit but lagged market estimates.