Sensex dips 0.2% on retail FDI uncertainty

Indian shares slipped 0.25 per cent on Monday, dragged by profit-taking, after last week's best rally seen in nearly two-and-a-half years, and on gnawing doubts over the government's ability to usher in retail-sector reforms amid tough political opposition.

The main 30-share Bombay Stock Exchange index Sensex closed 0.25 per cent lower, or 41.50 points at 16,805.33, with 17 of its components closing in the red.

The benchmark, which is one of the world's worst performers this year having fallen 18 per cent since the start of January, had logged its best week since July 2009 on Friday, on prospects of a revival in foreign fund inflows and expectations of a pick up in domestic growth.

Shares in retailers fell and the business community rounded on the government after the ruling Congress party put on hold plans to open up the country's $450-billion retail sector to foreign supermarkets.

Pantaloon Retail plunged 12.9 per cent, its biggest single-day fall in over two years, while Trent, a Tata group firm, fell by 3.26 per cent. Shoppers Stop, however, bucked the trend, adding 2.1 per cent, rebounding from a nine per cent slide seen in early trade.

Cigarettes-to-hotels conglomerate ITC, which fell 1.14 per cent, and leading private lender ICICI Bank, which shed 1.03 per cent, were among others that skidded as risk-wary investors booked profits and stayed away from fresh buying.

“The markets have been impacted by the uncertainty over the foreign investments in the retail sector. This is mostly a sentimental issue as traders are not sure whether the policy would be implemented,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services.

The 50-share National Stock Exchange index was down 0.22 per cent at 5,039.15 points.

The traders are also not taking "large positions", as Tuesday is a market holiday due to a Muslim religious festival, and due to the political wrangling over the policy reform. “Even though, the markets may perform reasonably well in December, I doubt whether the momentum could be sustained after the New Year," said Samir Gilani, head of equities at Mape Securities. “I think issues still persist hurting investment sentiment,” he added.