Sensex, Nifty fall most in nearly five weeks on Fed, China woes

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex and Nifty fell nearly 1 percent on Monday, posting their biggest single-day decline in nearly five weeks as blue chips declined on anxiety after China's factory output slowed and caution ahead of the Federal Reserve meeting this week.

Shares retreated further from a record high hit last week as Asian stocks skidded to five-week lows after a batch of weak data out of China raised the spectre of a sharp slowdown in the world's second-biggest economy.

Traders await outcome of the Fed's two-day meeting ending on Thursday for near-term direction as a recent string of improving U.S. economic data like domestic retail sales has raised expectations the Fed may act sooner to raise interest rates.

On domestic front India's WPI in August eased to 3.74 percent, its lowest level in nearly five years and core CPI fell sharply by around 50 basis points on month, raising hopes of at least positive rate outlook in Reserve Bank of India's policy review on Sept. 30.

"Fed rate hike worries are weighing but given the inflation prints at home one should expect the market to start building in potential rate cut by RBI in the next 3-6 months," said Deven Choksey, managing director at K R Choksey Securities said.

The benchmark BSE Sensex fell 0.9 percent, or 244.48 points, to end at 26,816.56, marking its lowest close since Aug. 28.

The broader Nifty lost 0.78 percent, or 63.50 points, to end at 8,042, its lowest close since Sept. 1.

Both the indexes marked their biggest single-day fall since Aug. 8.

Blue-chips led the falls. ITC Ltd fell 1.1 percent, while Housing Development Finance Corp ended 1.5 percent lower.

Tata Consultancy Services fell 1.9 percent, while Reliance Industries lost 1.3 percent.

Metal shares fell after a weaker-than-expected factory output data in the world's second largest economy. China's factory output grew at the weakest pace in nearly six years.

Tata Steel fell 1.6 percent and Hindalco Industries lost 3 percent.

Yes Bank fell 5.2 percent after the Reserve Bank of India said on Friday further share purchase in the lender by foreign investors will be allowed only after obtaining the central bank's approval. However, Fortis Healthcare surged 6.5 percent after Malaysia's IHH Healthcare Bhd said on Friday it was buying the company's Singapore unit.

Mid-cap state-run banks gained on fresh long positions in equity derivatives after positive inflation data.

Oriental Bank Of Commerce rose 2.3 percent, Syndicate Bank gained 2.9 percent and Andhra Bank advanced 2.8 percent.

(Editing by Anand Basu)