Sensex lower; Reliance Industries biggest drag

MUMBAI (Reuters) - The BSE Sensex fell on Friday and were set to snap a seven-day winning streak, weighed down by a 3.1 percent decline in Reliance Industries and as sentiment for blue chips was hit after foreign investors sold index derivatives.

Reliance Industries Ltd fell as much as 3.4 percent after Indian police arrested seven people, including government employees and a former journalist, whom they said ran a scam to steal official documents from India's oil ministry and sell them to energy consultants and large private companies.

Police did not provide any names, but an official at Reliance said it had learned one of its officials had been detained in connection with the case. The official said the company was unaware of any other details and it was conducting an internal investigation.

Reliance shares fell 3.1 percent and were the biggest drag on indexes.

Still, analysts said they expected shares to turn firmer next week ahead of the fiscal 2015/16 budget to be unveiled on Feb. 28 and as Indian metal and cement companies bid aggressively for coal blocks in the country's first auctions to sell mines, raising hopes about the fiscal deficit.

"In the near term, market would get a boost due to auction money," said Deven Choksey, managing director of K R Choksey Securities.

The benchmark BSE index lost 0.35 percent, while the broader NSE index fell 0.26 percent. Both indexes are still on track to post their second consecutive weekly gain.

Blue chips such as ICICI Bank declined after overseas funds sold index derivatives worth $132.75 million on Thursday, according to NSE data.

ICICI Bank lost 1.7 percent, while Housing Development and Finance Corp fell 1 percent.

Software services exporters fell on lingering concerns about waning overseas interest in the sector. A report by Bank of America-Merrill Lynch showed some of the IT companies were among the top-10 underweight stocks for foreign institutional investors.

Among IT stocks, Infosys fell 1.6 percent and Wipro lost 1.5 percent.

($1 = 62.2200 rupees)

(Reporting by Abhishek Vishnoi; Editing by Anand Basu)