Markets fall for third session as lenders drag

The BSE Sensex and Nifty fell for a third session and closed at their lowest level in 1-1/2 weeks on Tuesday, as lenders, including HDFC Bank declined on worries over offloading of index futures by foreign investors.

Lenders led declines as they form a major portion of index futures, with HDFC Bank losing 1.3 per cent and State Bank of India ending down 1.9 percent.

Foreign institutional investors sold index futures worth Rs 1,170 crore ($193.21 million) over the previous two sessions, turning sellers for the first time since April 16. Foreign buying in cash shares also slowed to Rs 77 crore on Monday from Rs 257 crore on Friday.

A record-setting rally, driven by hopes of a revival in domestic economy and that the Bharatiya Janata Party led by Narendra Modi will form the next government, is now chipping off as investors chose to book profit.

Subdued earnings from key companies, including Sesa Sterlite, Jindal Steel & Power, Hindustan Unilever and Dabur India, also dampened sentiment. "There is a rotation of money happening in the earning season. Some profit-taking is underway which is not bad. Market is getting ready for the election results," said Deven Choksey, managing director at K R Choksey Securities.

The Sensex fell 0.73 per cent, or 165.42 points, to 22,466.19, while the broader Nifty dropped 0.68 per cent, or 46 points, to 6,715.25. Both the indexes marked their lowest close since April 16.

Among other bank stocks, Kotak Mahindra Bank fell 2.1 per cent and IndusInd Bank ended down 1.7 per cent.

Consumer goods maker Hindustan Unilever fell 3.2 per cent following disappointment over its January-March sales volume growth.