Sensex hits one-week low; doubts creep in after recent rally

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex tumbled for a second consecutive session on Tuesday hitting its lowest close in a week as recent outperforming blue-chips such as ITC fell on doubts about whether foreign investors will continue their strong buying so far.

These doubts come as Asian shares were largely subdued ahead of Wednesday's release of minutes of the Federal Reserve's last meeting and chairman Ben Bernanke's testimony in Congress the same day.

Those events are expected to provide cues about the future of U.S. monetary stimulus programme, which analysts have said is a big contributor to foreign flows into Indian stocks.

Analysts also caution that a nearly 11 percent rally in the BSE Sensex since mid-May has made Indian shares more expensive and tactically overbought for the short term, raising prospects of a near-term correction.

"Profit-booking is seen across the board as markets went up too fast, too soon," said G. Chokkalingam, executive director and chief investment officer at Centrum Wealth Management.

While domestic institutional selling may continue for a while, foreign investors won't turn major sellers, added Chokkalingam.

The benchmark BSE Sensex fell 0.56 percent, or 112.37 points, to end at 20,111.61, marking its lowest close since May 14.

The broader Nifty fell 0.7 percent, or 42.80 points, to end at 6,114.10.

Among blue-chips, ITC Ltd fell 1.1 percent, marking its fourth day of declines.

Auto makers also fell after recent gains. Tata Motors Ltd lost 3 percent, marking its lowest close since May 6, while Maruti Suzuki India Ltd fell 2.6 percent after hitting its all-time high of 1,774.40 rupees on Monday.

Divi's Laboratories Ltd slumped 7 percent after its March-quarter profit fell 16.6 percent, lagging analysts estimates.

Shares in Voltas Ltd also fell 3.4 percent after its January-March net profit declined 91.4 percent to 89.2 million rupees.

However technology companies rose as recent falls in the rupee are making the sector more attractive and offsetting some of the worries over a pending U.S. immigration bill that sparked a selloff in the sector last month.

Infosys Ltd rose 1.1 percent, while Tata Consultancy Services Ltd ended 1.4 percent higher and HCL Technologies Ltd gained 1.2 percent.

Shares in Coal India Ltd gained 2.1 percent after its board recommended on Monday a higher-than-expected dividend of 4.3 rupees per share for financial year 2012-13.

(Editing by Sunil Nair)