Sensex hits two-month closing low; cyclical stocks drag

By Indulal PM

MUMBAI (Reuters) - The BSE Sensex fell for a second straight session on Tuesday to its lowest closing level in nearly two months as cyclical stocks such as Hindalco Industries declined ahead of the earnings reporting season.

Banking, metal and infrastructure stocks were among the leading losers ahead of July-September results from Infosys Ltd on Friday, which traditionally kicks off the earnings reporting season in India.

Adding to the woes, overseas investors had been net sellers in four out of the last five sessions. Foreign investors sold Indian shares worth $25.5 million on Wednesday, exchange and regulatory data showed.

Also weighing on sentiment, Credit Suisse Private Banking And Wealth Management Investments - Asia Pacific downgraded India to "neutral" from "outperform" on Oct. 1, citing "rich" valuations after a sharp rally post-elections. Markets were closed from Thursday to Monday because of holidays.

"There is a selling pressure and people are looking to churn portfolio. Earnings would be the next big trigger, while upcoming state-election results will also have an impact. The undercurrent is still positive," said Suresh Parmar, head, institutional equities at KJMC Capital Markets.

The benchmark BSE Sensex closed down 1.11 percent at 26,271.97, while the broader Nifty fell 1.17 percent to 7,852.40.

Cyclical stocks such as metals led the fall. Hindalco Industries closed down 4.5 percent and Tata Steel Ltd ended lower 1.9 percent on concerns about weaker growth in China.

Among other cyclical stocks, banks and infrastructure companies also witnessed selling pressure. Bank of Baroda ended 3.6 percent lower, while State Bank of India closed down 2.4 percent.

Infosys, which is set to report its second-quarter earnings on Friday, fell 0.4 percent.

Infrastructure stocks continued their fall. Larsen & Toubro closed 2.2 percent lower, falling for the fourth straight session as investors changed appetite from core infrastructure-related companies. However, L&T is still up 32 percent so far this year.

However, tyre makers gained as natural rubber prices in the local market are near their lowest level in five years. Apollo Tyres closed up 6 percent, while JK Tyre and Industries gained 4.4 percent.

(Reporting by Indulal PM; Editing by Subhranshu Sahu)