Sensex falls for second consecutive session; RBI holds rates steady

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex and Nifty fell for a second consecutive session on Tuesday, as software stocks declined on rupee strength and as investors booked profits after the Reserve Bank of India (RBI) kept interest rates unchanged, although signalling a potential easing by early 2015.

The RBI held interest rates steady, as widely expected, at a policy review on Tuesday, and said it could ease monetary policy early next year provided inflationary pressures do not reappear and the government controls the fiscal deficit.

Falling inflation, slowing growth in the previous quarter, plunging oil prices, China's surprise easing and government talk of lower rates had raised expectations, although only 4 out of 45 economists in a Reuters poll said the RBI would cut rates.

 

"By not cutting rates the RBI has remained consistent in their policy objective of decisively bringing down inflation and long-term inflationary expectations," said Arvind Sethi, managing director of Tata Asset Management Ltd.

A rate cut would be likely around the budget, if the government is able to hold the deficit at around 4.1 percent, Sethi added.

The 50-shares Nifty closed down 0.36 percent at 8,524.70, after hitting a record high of 8,623 in the previous session.

The benchmark BSE Sensex ended 0.4 percent lower at 28,444.01, falling for a second straight session.

Blue-chips including software services exporters led the declines. Infosys fell 2.2 percent while Tata Consultancy Services ended down 1.3 percent.

Housing Development Finance Corp lost 1.1 percent and Tata Motors ended down 1.3 percent.

Bajaj Auto fell 1.3 percent after its November sales declined 0.4 percent compared to the previous year due to festive season adjustments and loss of market share, traders said.

Mahindra & Mahindra also lost 2.4 percent, adding to Monday's 2.2 percent decline, after its November vehicle sales fell 13 percent on year.

Shares of state-run oil marketing companies fell after crude oil rose from five-year lows and news agency Newsrise, citing a senior government official, reported India has raised excise tax on petrol and diesel again.

Indian Oil Corp ended down 2.4 percent, Hindustan Petroleum Corp lost 1.8 percent while Bharat Petroleum Corp fell 4.3 percent.

Paint companies which use crude oil derivatives also took a beating. Asian Paints lost 3.4 percent and Berger Paint ended down 3.9 percent.

Among gainers, state-run banks with higher available-for-sale bonds rose on hopes of higher treasury gains after the benchmark 10-year bond yield plunged to a 16-1/2 month low after the policy.

Punjab National Bank rose 1.5 percent while Allahabad Bank soared 6.3 percent.

Defence companies rose on notification of new foreign investment rules by the government, analysts said.

Bharat Electronics surged 9.1 percent and Astra Micro Wave Products gained 8.7 percent

($1 = 62.0100 rupees)

(Editing by Sunil Nair)