Sensex retreats from record highs; state-run banks slump

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex fell on Thursday after touching its ninth consecutive record high as state-run banks such as State Bank of India slumped on concerns about losses on their debt portfolios as domestic bonds extended a slide this week.

Shares were also hit as blue chips including Reliance Industries fell on profit-taking ahead of European Central Bank's policy decision later in the day and monthly U.S. jobs data on Friday.

Caution is also likely to prevail as India heads into the five-week long elections starting on Monday, amid widespread expectations the main opposition Bharatiya Janata Party, will sweep to power.

"Some paring of positions after such a strong rally ahead of elections is on expected lines," said Phani Sekhar, a fund manager at Angel Broking.

Nifty fell 0.24 percent after earlier rising as much as 0.36 percent to a lifetime high of 6,776.75. The falls marked the index's first fall in 11 sessions.

The BSE Sensex fell 0.19 percent after earlier rising as much as 0.31 percent to a record high of 22,620.65.

Still, heavy foreign buying has continued to underpin share gains. Overseas investors bought a net 5.95 billion rupees worth of shares on Wednesday, bringing the total since February to nearly $3.5 billion.

State-run banks fell after the benchmark 10-year bond yield rose to as high as 8.9952 percent, the highest level since December 6, triggering worries about potential mark-to-market loss on their bond portfolios.

State Bank of India fell 2 percent, Punjab National Bank ended down 2.1 percent, while Bank of Baroda lost 2.3 percent.

Other blue chips were hit by profit-taking. Reliance Industries Ltd lost 0.6 percent, while ICICI Bank Ltd ended down 0.8 percent.

Larsen & Toubro Ltd also fell 0.8 percent after the Economic Times newspaper reported India's biggest engineering firm, was going to trim its 1.7 trillion rupees order book by about 10 percent, without specifying how it got to the estimates.

The company later said in a filing to stock exchanges that slow moving orders may be removed to enable carry forward of healthy backlog of orders.

IDFC Ltd ended 2.3 percent down on worries regulatory requirements for banks would weigh on its return ratios after India's central bank on Wednesday granted preliminary bank licence to the infrastructure sector lender, sending its shares up as much as 8.8 percent.

Applicants who failed to win a licence at this stage slumped. L&T Finance Holdings Ltd plunged 9.7 percent, while LIC Housing Finance Ltd lost 1.3 percent.

(Editing by Anand Basu)