India's benchmark index fell on Tuesday, retreating from a nearly three-year high hit earlier in the session, as bluechips declined ahead of the October 17 deadline to lift the US debt ceiling. Lenders also led decliners after data showing higher-than-expected headline and retail inflation on Monday sparked concerns the central bank would raise interest rates this month.
Indian shares snapped five day of gains, totalling 3.6 percent as of Monday's close, on profit-taking, dealers said. Markets are shut on Wednesday for a public holiday. Also, a Morgan Stanley survey of 95 institutional investors said investors have turned "equal-weight" on Indian stocks with only 21 percent of the investors being "overweight" on India versus 39 percent in February.
"Recent outperformance is weighing. Earnings are important but US debt ceiling risk and RBI policy would take centrestage from here onwards," said G. Chokkalingam, managing director and chief investment officer, Centrum Wealth Management. The benchmark BSE index fell 0.29 percent, or 59.92 points, to end at 20,547.62, earlier hitting its highest intraday level since November 2010. The broader NSE index fell 0.39 percent, or 23.65 points, to end at 6,089.05, snapping its five-day winning streak.
Higher odds of a rate hike in October after higher-than-expected headline and retail inflation data on Monday weighed on banking stocks. ICICI Bank Ltd fell 2.3 percent while State Bank of India Ltd ended 2.1 percent lower. India's No 3 lender by assets HDFC Bank fell 2.3 percent after posting quarterly profit growth of 27 percent, in line with analyst estimates, due to losses in its investment portfolio, higher operating expenses and worsening asset quality. Tata Motors Ltd ended 0.4 percent lower on profit taking after making an all-time high of 393.30 rupees on Monday.
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