Sensex ends flat; record low rupee weighs

By Himank Sharma

MUMBAI (Reuters) - The BSE Sensex ended flat on Monday as a fall in the rupee to a record low hit lenders on fears the RBI would hold off from cutting interest rates, while IT companies rose on hopes of improving returns from overseas markets.

Rupee fell to a record low against the dollar on Monday, escalating worries about the country's current account deficit and complicating the task for policymakers looking to revive an economy that grew at its slowest in a decade in 2012/13.

The falls also sparked concerns foreign investors would turn net sellers after strong buying this year, offsetting initial hopes that Friday's slightly stronger-than-expected jobs data would reduce the prospect of an early rolldown in the U.S. monetary policy.

Investors are also focused on key data this week, including industrial output and inflation indicators, which will help set expectations ahead of the Reserve Bank of India's policy review on June 17.

"There has been an outflow from the debt markets by FIIs due to concerns on the currency as well as the direction of the markets. There is a fear that if something similar happens to equity markets, our markets may not be able to absorb selling pressure from FIIs without reacting sharply lower," said Deepak Jasani, head of retail research at HDFC Securities.

"But at the same time the sharp currency depreciation gives hope that RBI will intervene in a big way at some point and that the government will make a major policy announcement to manage the current account deficit and the rupee."

The BSE Sensex closed up 0.06 percent, or 11.84 points, to end at 19,441.07, while the broader Nifty closed down 0.05 percent, or 3 points, at 5878.00.

The NSE banking index fell 1.18 percent to its lowest level since April 18 after all constituents, except HDFC Bank Ltd , ended in the red.

Worries that a weak rupee would make the RBI more cautious about cutting interest hit banks. Most traders and analysts expect the central bank to keep rates on hold next week after cutting 75 basis points so far this year.

ICICI bank Ltd closed down 2.09 percent, Yes bank Ltd fell 2.41 percent and State Bank of India closed 0.62 percent lower.

Meanwhile, GlaxoSmithKline Pharmaceuticals Ltd closed 4.67 percent down after Nomura downgraded the stock by a notch to "reduce", citing the adverse impact from the government's recent price controls and decreasing likelihood of an open offer from parent GlaxoSmithKline Plc .

Shares in Jet Airways closed down 11 percent after its CEO resigned ahead of a key regulatory meet to decide on approval for a stake sale to Gulf carrier Etihad Airways.

However, information technology stocks rose, with Infosys Ltd , rising 1.63 percent, Tata Consultancy Services Ltd 0.4 percent and HCL Technologies Ltd 1.24 percent as weak rupee improves software exporters' profits.

Engineering company Pennar Industries Ltd gained 1.66 percent after its board announced a buy-back of up to 100 million rupees worth of stock.

Multi Commodity Exchange of India rose 3.72 percent after it launched a new proprietary platform to corner the market for exchange-based trading of debt securities.

(Editing by Jijo Jacob)