Sensex falls to 1-month low amid Fed rate bets

Indian stocks slid for a third day, with the benchmark index holding at a one-month low, amid concern the recent rally is overdone and that the US Federal Reserve is moving closer to raising borrowing costs.

Hindalco Industries tumbled to the lowest level in almost a year, after a court summoned Chairman Kumar Mangalam Birla in a coal-mine allocation case. Sesa Sterlite fell to a two-month low, while Tata Steel dropped to the lowest in 16 months. Cairn India decreased to the lowest price since July 2009 after Cairn Energy said it got a $1.6-billion demand from Indian tax authorities.

The BSE Sensex lost 50.70 points, or 0.2 per cent, to close at 28,659.17, after swinging between a gain of 0.5 per cent and a loss of 0.4 per cent. The gauge has lost 2.7 per cent since Monday as stronger US jobs data fueled concern the Fed may signal earlier rate increases at its meeting next week.

The National Stock Exchange's benchmark Nifty lost 12.10 points, or 0.14 per cent, to end below the 8,700 mark at 8,699.95.

The Sensex trades at 16.1 times its 12-month projected earnings, compared with 11.4 for the MSCI Emerging Markets Index.

"Valuations are on the heavier side and the expected hike in US interest rates is an overhang," Amar Ambani, head of research at IIFL Holdings in Mumbai, said by phone on Wednesday.

"The market is likely to consolidate as investors watch how key economic reforms are implemented and how earnings pan out."

Hindalco tumbled 5.6 per cent in a fifth day of losses, the longest run since December. The stock was the worst performer on the Sensex. Sesa Sterlite lost 2.5 per cent and Tata Steel declined two per cent to the lowest price since October 2013.

Cairn India decreased 3.2 per cent in a seventh day of losses, the longest streak since last January. Cairn Energy owns 9.8 per cent of the Indian explorer.

The Sensex capped its fourth weekly gain on Friday after the central bank cut interest rates for the second time this year and Prime Minister Narendra Modi announced plans to spend more on infrastructure.