Sensex retreats from three-month high; earnings in focus

REUTERS - Indian shares fell on Friday, a day after hitting a near three-month high, as investors braced for yet another weak quarter for earnings, and after weak business sentiment data from Japan rekindled global growth worries.

Business sentiment among Japan's big manufacturers deteriorated to the lowest in nearly three years and is expected to worsen in the coming quarter, a closely watched central bank survey showed on Friday.

Asian shares and the dollar both lost more ground as investors began the new quarter in a cautious mood, with glimmers of life in China's economy offset by a darkening mood in Japan.

Markets back home were also a bit groggy after rallying about 10 percent in March following a fiscally prudent union budget and amid expectations of a 50 basis point rate cut by the Reserve Bank of India (RBI) on April 5.

"Whatever happened in the month of March was the rally of March. Now I'm expecting a correction as the results season is likely to start and things will get difficult from here on," said AK Prabhakar, head of research at IDBI Capital.

Analysts have been cutting projections for the March quarter, due to a surge in bad loans for Indian banks, oil price slump and weak global demand.

If the declining projections are realised, already costly stocks could become pricier and equity investors could become even more skittish.

The broader NSE Nifty was down 0.77 percent at 7,678.55 at 1.03 p.m., while the benchmark BSE Sensex was down 0.74 percent at 25,154.12. Both indexes hit their highest level since Jan. 6 on Thursday.

Automakers Tata Motors and Mahindra and Mahindra fell more than 1 percent after the Supreme Court on Thursday extended a ban on the sale of large diesel cars in New Delhi until the next hearing of the case.

Infrastructure firm IVRCL slumped 7 percent after a flyover, which the company was building, collapsed on Thursday in the Indian city of Kolkata.

Among the gainers, Jaiprakash Associates surged 9 percent after UltraTech Cement's board approved a deal to buy the former's identified cement plants at an enterprise value of 159 billion rupees.

(Reporting by Aastha Agnihotri in Bengaluru; Editing by Subhranshu Sahu)