Sensex falls for second day; inflation, rupee dash rate-cut hopes

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex fell for a second consecutive session on Wednesday to its lowest close since April 18 as lenders such as Axis Bank lost ground after high retail inflation in May was seen virtually ruling out a rate cut next week.

The annual consumer price inflation slowed for the third straight month in May to 9.31 percent, government data showed on Wednesday, but still remained well above the RBI's comfort level.

At the same time, April factory data showed industrial output grew less than expected at 2 percent, but not slow enough to spur the RBI to cut rates at its policy review on June 17.

Although foreign institutional investors (FIIs) have remained net buyers of Indian shares worth 9.62 billion rupees so far in June, a closer look reveals the pace of flows has slowed if compared to the average monthly buying of 166.41 billion rupees seen in 2013 till May-end.

"I think the simple expectation out of the market is that since it's an oversold market it will probably carry the tendency of bouncing back in between on any positive news," said Deven Choksey, managing director of K. R. Choksey Securities in Mumbai.

"Currently, even though the bias is on the downside, you could expect some upside on positive news."

The BSE Sensex fell 0.53 percent, or 101.87 points, to 19,041.13.

The broader Nifty lost 0.49 percent, or 28.60 points, to 5,760.20.

Lenders lost ground as high retail inflation in May was seen virtually shutting the door on a rate cut next week, especially after a sliding rupee has reignited current account deficit concerns.

Axis Bank Ltd skid 3.65 percent, while Housing Development Finance Corporation Ltd closed down 1.25 percent.

Blue chips such as ITC Ltd fell as the rupee's recent weakness continued to stoke fears that foreign investors may pare positions, dealers said.

FIIs provisionally sold 8.85 billion rupees worth of Indian stocks on Tuesday, marking their biggest single-day sale since February 28, exchange data showed.

IT stocks fell after India said it was considering measures to stabilise the rupee after the local currency hit an all-time low on Tuesday.

Infosys Ltd closed down 2.19 percent after rising as much as 2.1 percent earlier in the session. Tata Consultancy Services Ltd ended 2.23 percent lower.

Titan Industries Ltd slumped 13.76 percent as brokerages downgraded the jewellery maker over concerns about profit after recent measures to curb gold imports.

Wockhardt Ltd fell 4.35 percent after the health ministry suspended the sale and distribution of Dextyropropoxyphene, a pain-relieving drug.

However, among stocks that gained, Jindal Steel and Power Ltd rose 4.16 percent, after Tuesday's fall of 15.38 percent on the CBI case filing was seen as over done.

(Editing by Subhranshu Sahu)