Sensex falls 291 points, hits four-month closing low

By Manoj Dharra

MUMBAI (Reuters) - The BSE Sensex fell to an over-four-month closing low on Thursday on worries that foreign fund inflows may drop on continued political uncertainty and likely muted earnings from companies.

Technology shares led the losses as economic data from the United States, the biggest outsourcing market for Indian technology companies, pointed to a weak jobs market. Bank shares traded lower a day after data showed 2012/13 loan growth fell below the central bank's projection on slow demand.

The 50-share Nifty and the benchmark BSE Sensex broke below their the 200-day moving average, a key technical support.

Market participants are increasingly jittery that the current domestic economic and political situation can spark a broader sell-off by overseas investors who have pumped in above $10 billion so far this year.

"FIIs can choose other markets which are doing way better than India. In the short run, India may go out of flavour as the government needs to follow through on the announcements it has made," said Sandip Sabharwal, chief executive - portfolio management services at brokerage Prabhudas Lilladher.

The BSE Sensex fell 1.55 percent, or 291.94 points, to 18,509.70, posting its biggest daily percentage fall since February 26, and lowest close since November 23, 2012.

The broader Nifty ended down 1.73 percent, or 98.15 points, to 5,574.75, posting its biggest daily fall since February 28.

Market participants believe some reversal of flows in the near term may happen unless steps are followed on economic revival and monetary policy becomes supportive of growth.

Technology shares fell, with Infosys Ltd ending 3 percent lower, while Tata Consultancy Services Ltd fell 2.3 percent.

Bank shares also fell a day after data showed advances increased at a slower pace in 2012/13 compared with a year earlier, and fell short of the central bank's projection, hurt by lower demand for credit from companies in a slowing economy.

ICICI Bank Ltd fell 2.2 percent, HDFC Bank Ltd declined 1.2 percent and State Bank of India ended 1.8 percent lower.

Bharti Airtel Ltd's shares fell 2.6 percent after a panel of judges at India's Delhi High Court set aside on Thursday the court's earlier order that had halted the execution of a government ban on the company's 3G service pacts with rival carriers.

However, Dr Reddy's Laboratories Ltd shares gained 2.8 percent after the company launched Zoledronic Acid injection in the United States.

Shares in Coal India Ltd rose 3 percent after Bloomberg News reported that the government plans to raise 200 billion rupees by selling part of its stake in the company.

(Additional reporting by Abhishek Vishnoi; Editing by Anand Basu)