BSE Sensex marks 2-1/2 week closing low

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex fell for a fifth straight session on Monday as investors pared positions in blue-chip stocks such as Reliance Industries ahead of the Reserve Bank of India and the U.S. Federal Reserve's policy meetings later this week.

The wholesale price inflation hit a 14-month high in November, as food price surged, cementing expectations the central bank will raise interest rates for a third consecutive time at its policy review on Wednesday.

Traders say a rate hike, although factored in to an extent, could undermine the confidence of investors and companies as the economy remains in a fragile state with growth languishing below 5 percent.

Foreign institutional investors sold shares worth 4.32 billion rupees on Friday, to snap their 10-day buying streak, raising concerns ahead of the Fed's meeting ending on Wednesday.

The Fed is widely expected to start withdrawing its monetary stimulus by early next year.

"Fears about the prospects of a hawkish stance by the RBI governor have increased in the background of recent gloomy CPI and WPI data," said Gaurang Shah, assistant vice president at Geojit BNP Paribas Financial Services Ltd.

Anything above 25 bps rate hike could spook the markets in the near term, Shah added.

The benchmark BSE Sensex fell 0.27 percent, or 56.06 points, to 20,659.52, marking its lowest close since November 28. The index is now 4 percent away from a record high of 21,483.74 hit a week earlier.

The broader Nifty ended lower 0.22 percent, or 13.70 points, at 6,154.70, marking its biggest losing streak since the seven days ending November 13.

Among blue-chip shares, Reliance Industries Ltd fell 2.3 percent, while Sun Pharmaceutical Industries Ltd ended lower 2.6 percent.

Among rate-sensitive stocks, mortgage lender Housing Development Finance Corporation Ltd fell 1 percent, while Mahindra and Mahindra Ltd ended 2.5 percent lower.

Tata Chemicals Ltd fell 1.2 percent after the RBI placed a cap on further foreign institutional investments in the company.

Clariant Chemicals India Ltd fell 2.1 percent after the company said it intends to acquire Plastichemix Industries for 1.35 billion rupees.

Steel shares fell after a measure of growth in China's vast factory sector slowed to a three-month low in December as reduced output offset a pick-up in new orders.

Tata Steel Ltd fell 1.5 percent, while Jindal Steel and Power Ltd ended 3.2 percent lower.

However, among stocks that gained, GlaxoSmithKline Pharmaceuticals Ltd surged 18.9 percent after parent GlaxoSmithKline Plc said it plans to spend over $1 billion to buy up to 20.6 million shares to raise its stake in its Indian unit.

(Editing by Subhranshu Sahu)