Sensex falls more than 1 percent; metals, drugmakers drag

MUMBAI (Reuters) - India's stock markets fell more than 1 percent on Monday as investors booked profit in recent outperformers such as State Bank of India and Hindalco Industries ahead of a busy week of events, including the release of U.S. economic data and the expiry of domestic derivative contracts.

The broader NSE Nifty has risen 9.3 percent so far this month and is headed for its biggest monthly gain since October 2013 after the government stuck to its fiscal deficit target and on hopes of bigger-than-expected rate cuts by the central bank at its policy meeting April 5.

But caution prevailed on Monday as investors cautiously awaited U.S. economic data and speeches by Federal Reserve officials this week.

Meanwhile, monthly derivative contracts expire on Thursday, which also marks the end of the financial year.

Traders said they are still optimistic about markets in the long term, saying a pick-up in earnings would further add to the gains this month.

Any rally over the next few quarters will be earnings-driven as opposed to a macro play, said Varun Khandelwal, director at Delhi-based portfolio management firm Bullero Capital.

The broader NSE Nifty was trading lower by 1.37 percent at 2.54 p.m., while the benchmark BSE Sensex fell 1.46 percent. Recent outperformers were among the biggest losers: State Bank of India fell 4 percent after gaining 24 percent this month, while Hindalco dropped 8 percent after rising 32 percent.

Meanwhile, drug makers such as Sun Pharmaceuticals fell as investors switched to cement names Ambuja Cements and UltraTech Cement , traders said, adding these firms were expected to outperform the market because of the government's infrastructure push.

Natco Pharmaceuticals slumped 14 percent after the drug maker said it had received 483 observations from the U.S. Food and Drug Administration for its North India plant.

Meanwhile, IT stocks such as Infosys Technologies gained after Accenture Ltd raised its full-year revenue forecast.

(Reporting by Manoj Rawal; Editing by Subhranshu Sahu)