Sensex falls most in three weeks, ahead of inflation

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex fell more than 1 percent on Thursday to mark a third consecutive day of declines since hitting a record high at the start of the week as Tata Motors slumped after saying its unit Jaguar Land Rover would increase capital spending.

Rate-sensitive stocks such as ICICI Bank also fell on caution ahead of retail inflation data later in the day, which will be followed by wholesale inflation on Monday and is seen as key for the central bank's policy review on Dec 18.

Tackling inflation will be a priority, finance minister and RBI governor said on Wednesday, after high prices contributed to painful losses for the ruling Congress party in state elections.

Despite the fall, the sentiment remains that of 'buy on dips' on hopes the domestic economy is looking at a trough and on continued foreign investor flows which crossed the 1-trillion-rupee mark earlier this week.

"At domestic level, CAD is improving, rupee is stabilising and GDP growth seems to have bottomed out. So while we are not saying that we are out of the woods but believe that worst may be behind us," said Dipak Acharya, Fund Manager of equities at Baroda Pioneer AMC.

Acharya remains positive on Indian equities for 2014, but adds that in the short term, there would be caution ahead of the Federal Reserve meeting and the central bank's monetary policy review.

The Sensex fell 1.16 percent, or 245.80 points, to end at 20,925.61, to mark its lowest close since Dec 4.

The Nifty fell 1.12 percent, or 70.85 points, to end at 6,237.05, closing below the psychologically important 6,300 level.

Both indexes also marked their biggest single-day fall since Nov 21.

Tata Motors slumped 5 percent after the auto maker said luxury unit Jaguar Land Rover would increase its capital spending to around 3.5 billion pounds to 3.7 billion pounds in fiscal year 2015 from an estimated 2.75 billion pounds in fiscal 2014.

Among rate-sensitive stocks, ICICI Bank fell 2.2 percent while State Bank of India lost 1.09 percent.

Capital good makers fell on caution ahead of industrial output data, also due out later in the day.

Larsen and Toubro ended 1.4 percent lower, adding to the 1.8 percent fall in the previous session, while Bharat Heavy Electricals fell 0.5 percent, adding to Wednesday's 2.1 percent decline.

However, among stocks that gained, GMR Infrastructure rose 1.4 percent after it hired four banks including Citigroup and JPMorgan to manage the listing of its airport business that is expected to raise $300-$350 million, sources with direct knowledge of the matter said.

Also, GMR Infrastructure and contractor Megawide Construction Corp are the likely winners of a $400 million airport terminal tender, the biggest so far under the Philippines' public-private partnership programme.

Shares in search service provider Just Dial gained 1.5 percent after index compiler FTSE said it will include the stock in its FTSE AllCap index, effective from the start of trading on December 23.

(Editing by Sunil Nair)