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Stocks dropped, with the benchmark index retreating from a three-week high in volatile trading, as automakers and lenders retreated.
Tata Motors, owner of Jaguar Land Rover, and Bajaj Auto, a motorcycle maker, were among the worst performers on the S&P BSE Sensex. Oil & Natural Gas Corp, the largest explorer, declined for the first time in five days. Housing Development Finance Corp, the largest mortgage lender, slid the most in a week and Axis Bank retreated 1.1 per cent.
The Sensex fell 0.2 per cent to 27,645.53 at the close, changing direction at least 10 times. Stocks rose on Monday, extending a two-week rally, after a report on the progress of the monsoon strengthened expectations that slowing inflation will allow the central bank to cut rates. Global funds bought $275 million of stocks on May 15 in a second day of purchases, paring this month's outflows to $448 million, still the highest among eight Asian markets tracked by Bloomberg.
"After Monday's uptick, it's prudent to see amount of consolidation," Gaurang Shah, a vice president at Geojit BNP Paribas Financial Services, said in an interview with Bloomberg TV India on Tuesday. "The sell-side figures from the foreign investors seem to have subdued and that's comforting. The worst is possibly behind us."
The Sensex entered a so-called correction on May 7 after completing a 10 per cent decline from its January 29 record amid concern about the pace of earnings growth and delays in the passage of key economic bills in parliament.
Consumer prices climbed 4.87 per cent in April from a year earlier, slowing from 5.17 per cent in March, data showed last week.
Reserve Bank of India (RBI) Governor Raghuram Rajan maintained interest rates at a scheduled review on April 7 as he waited for lenders to pass on two previous rate cuts to customers. The next policy review is on June 2.
"A 25-basis point cut is already discounted after data on factory production and inflation," Geojit's Shah said. "There will be excitement if RBI cuts by 50 basis points."
Tata Motors decreased 2.1 per cent, the worst performer on the Sensex, and Bajaj Auto slid 0.8 per cent. Oil & Natural Gas retreated 1.3 per cent, ending a four-day, 3.9 per cent advance. Housing Development lost 1.9 per cent, the first fall in three days. Today's declined trimmed Axis Bank's this year's gain to 12 per cent Tata Power Co, India's biggest non-state generator, may report net income of Rs 77.2 crore ($12.1 million) in the quarter ended March 31, versus a loss of Rs 150 crore a year ago, according to the median of estimates in a Bloomberg survey. The results are due on Tuesday. The stock rose 0.8 per cent.
While eight out of the 14 Sensex firms that have posted results for the March quarter have beaten or matched estimates, the gauge's earnings may drop for a second straight quarter, forecasts compiled by Bloomberg show.
The Sensex has risen 0.5 per cent this year and trades at 15.3 times projected 12-month earnings, compared with the MSCI Emerging Markets Index's multiple of 12.4.
