Nifty retreats from record high on risk aversion, RBI review

By Abhishek Vishnoi

MUMBAI (Reuters) - The Nifty retreated from a record high on Monday as blue chips fell on risk aversion in global markets after gold and oil tumbled, while caution also prevailed a day ahead of the Reserve Bank of India's policy review.

Plunging prices for commodities, hit by slowing factory activity in China and Europe, raised fears of deflation and hammered emerging market stocks and commodity-linked currencies.

Investors await the central bank's policy review on Tuesday with markets already pricing in a rate cut amid a slump in crude oil prices, although only 4 out of 45 economists in a Reuters poll said the Reserve Bank of India will cut rates.

"It will be mistake if RBI doesn't cut rates on Tuesday. You can't sit in an island of inflation amid a crude oil slump and world worrying about low growth," said G. Chokkalingam, founder of Equinomics, a research and fund advisory firm.

The 50-shares Nifty closed down 0.38 percent at 8,555.90, after earlier hitting a record high of 8,623.

The benchmark BSE Sensex ended 0.47 percent lower at 28,559.62, snapping its three-day gaining streak.

India's outperformance in 2014 and the over-exposure of emerging market funds are also prompting investors to lock in profits.

Credit Suisse trimmed India overweight to 10 percent from 15 percent versus emerging market benchmarks.

Oil explorers led the falls after oil slid to five-year lows in its longest losing streak since 2008.

Reliance Industries fell 2.4 percent, Oil and Natural Gas Corp ended down 3.9 percent and Cairn India lost 1.5 percent.

Select lenders also fell. Housing Development Finance Corp fell 2 percent while State Bank of India lost 0.6 percent.

Larsen & Toubro fell 1.1 percent on worries lower crude prices may lead to lower investment and order flows from the Middle East.

Mahindra & Mahindra lost 2.2 percent after its November vehicle sales fell 13 percent on year.

Among gainers, crude oil users rose on hopes of higher operating margins and increased discretionary spend in the economy.

Jet Airways gained 7.9 percent, Apollo Tyres rose 2 percent while Hindustan Petroleum Corp was up 1.2 percent.

Berger Paints surged 12 percent while Asian Paints advanced 7 percent.

Jewellery firms also surged after India scrapped a rule that mandated trading companies to export 20 percent of the gold imported.

Titan Company gained 5.2 percent, Tribhovandas Bhimji Zaveri jumped 19.1 percent and Gitanjali Gems surged 19.9 percent, while PC Jewellers ended up 2.5 percent.

($1 = 62.0100 rupees)

(Editing by Sunil Nair)