Stocks fall for 4th session as US rate hike fears weigh

Tata Steel and ONGC among the biggest losers on the Sensex

Stocks dropped for a fourth session in a volatile trading session, as investors weighed the prospects for a US interest-rate increase next month and its impact on capital flows.

Tata Steel and Oil & Natural Gas Corp, the largest state-run explorer, were among the biggest losers on the BSE Sensex. Lupin led decline on a gauge of health care companies, which fell for a third day. Britannia Industries slumped the most since June 1998 after its earnings missed estimates.

The Sensex slid 0.3 per cent at the close, after changing direction at least 12 times. The NSE Nifty 50 Index lost 0.2 per cent to 7,731.05. The indexes slid last week on concern the US Federal Reserve may raise borrowing costs as early as next month. Higher rates in the US would temper flows to emerging markets. Global funds have bought $271 million of Indian equities this month, down from $585 million in April and $4.1 billion in March, which was the biggest inflow in three years.

"The market is in a tight range, and any upside will be capped unless clarity emerges on the Fed interest rates and the monsoon's progress," Paras Bothra, a Mumbai-based vice president of equity research at Ashika Stock Broking, said by phone. "It will take a lot of good news for the Nifty to break the 8,000-mark."

Odds of an interest-rate increase next month are now at 28 per cent, up from four per cent a week ago. Federal Reserve policy makers indicate a hike in June would be likely if the economy continues to improve. John Williams, president of the Fed Bank of San Francisco, said Sunday on Fox News the US economy should be solid enough to merit raising rates in 2016. bloomberg

Southwest monsoon has hit the Andaman and Nicobar island two days before its normal date, but a cyclone in the Bay of Bengal is likely to weaken its progress, likely delaying the onset of the four-month rainy season, the weather bureau said last week. The agency has predicted the monsoon to set over the southern Kerala state on June 7, a delay of six days from the normal onset date of June 1.

Tata Steel fell 2.8 per cent in a third day of losses, while ONGC retreated the most since April 18. Drugmaker Lupin dropped 2.6 per cent, extending Friday's nine per cent slide that was triggered by a cut in revenue forecast for the year ending March 2018. Rival Cipla decreased 1.9 per cent.

Britannia tumbled 8.5 per cent. The company's fourth-quarter profit of Rs 190 crore lagged behind the Rs 219 crore estimated by analysts. Sales of Rs 2,190 crore missed the Rs 2,240-crore estimate. The stock, which is not part of the Sensex, has surged 43 per cent annually from January 1, 2009 through December 31, 2015, versus the 18 per cent yearly climb by the Sensex in the same period, data compiled by Bloomberg show.

Cigarette maker ITC, which has the third-highest weighting on the index, jumped the most in three months after announcing a plan to issue free shares. ITC said toward close of trade Friday that it will give a free share for every two held. The company also posted fourth-quarter net income of Rs 2,500 crore, matching the analysts estimate Rs 2,520 crore. Sales of Rs 10,060 crore beat the estimate Rs 9,790 crore.

The Sensex has fallen 3.4 per cent this year and trades at 15.6 times 12-month forward earnings. That compares with 11.2 times for the MSCI Emerging Markets Index.