The BSE Sensex fell 2.9 percent on Monday in its biggest drop in almost six weeks as investors took profits after a near 90 percent rally over the past three months, with weak Asian and European markets aiding the selloff.

However, underlying sentiment was firm with expectations the economy was set to recover in the coming months and hopes the government will unveil market-friendly measures in the budget in early July to boost growth.

Among the main losers were State Bank of India and ICICI Bank that had more than doubled in value since early March, while Tata Steel and Sterlite Industries dropped as metal prices edged down.

Energy giant Reliance Industries and state-run explorer Oil and Natural Gas Corp eased as oil prices fell by more than $1.50 to below $67 a barrel.

Outsourcers such as Tata Consultancy, Infosys Technologies and Wipro, which get most of their revenue from overseas, bucked the trend and rose as the

rupee dropped.

The 30-share BSE index fell 437.63 points to 14,665.92, its lowest close this month. Twenty-five stocks declined.

“The market sustaining its rise was contingent on global markets also performing well. But international markets are down today,” Gajendra Nagpal, chief executive of Unicon Financial Intermediaries, said from New Delhi.

“Most of these markets had run up quite a bit and were due for some profit-taking. It is healthy and so there is not much to fear.”

The benchmark had soared 88 percent over a 13-week winning streak, its best run in four years, making it one of the world’s strongest performing indexes as signs the global economy has got past the worst fueled an equities rally across regions.

Most of the rise can be attributed to more than $6 billion of investments from foreign funds since mid-March, with hopes of investor-friendly reforms from the re-elected ruling coalition boosting sentiment.

Traders said there may be sporadic profit-taking, but longer-term investors would use the dips to enter the market.

Underlying sentiment was positive as smaller-than-expected U.S. job losses strengthened signals a recovery in the global economy was underway, traders said.

“Foreign funds will continue to pour money into India and other emerging markets, and this will drive shares up over the longer term,” Amitabh Chakraborty, head of research at Religare Securities, said.

“You will see GDP being upgraded and earnings also being upgraded in the next few months.”

Government-run State Bank of India slid 6.8 percent to 1,695.10 rupees, while private-sector rival ICICI Bank slipped 3.6 percent to 724.25 rupees.

Tata Steel fell 10.2 percent to 416.55 rupees, as Nomura downgraded the company’s stock to “reduce” from “buy”.

“Tata has outperformed both its Indian and international peers significantly, confirming our belief that the stock has run ahead of its fundamentals,” analyst Satish Kumar wrote in a note to clients.

Non-ferrous metals producer Sterlite dropped 3.3 percent to 650.25 rupees.

Reliance Industries, which has the biggest weight in the main index, fell 1 percent to 2,188.90 rupees, while ONGC dropped 5.6 percent to 1,114.65 rupees.

Infosys, India’s No. 2 IT-services firm, gained 2.5 percent to 1,733.20 rupees, while larger rival Tata Consultancy advanced 2.3 percent to 738.10 rupees. Wipro rose 3.4 percent to 406 rupees.

In the broader section, losers led gainers by almost 4 to 1 on relatively heavy volume of 660.2 million shares.

The 50-share NSE index fell 3.4 percent to 4,429.90.

MSCI’s measure of other Asian markets fell 2.1 percent, but Japan’s Nikkei rose 1 percent as a weaker yen cheered exporters.

By 1032 GMT, the FTSEurofirst 300 index of top European companies was down 1.3 percent.

MAIN TOP 3 BY VOLUME

* Dish TV on 73.3 million shares

* Unitech on 34 million shares

* Suzlon Energy on 23.3 million shares

STOCKS THAT MOVED

* Dish TV India Ltd slumped 16.4 percent to 44.90 rupees after the company’s founders sold a 5.8 percent stake at 49 rupees, an 8.8 percent discount to Friday’s closing price, dealers said.

* Indiabulls Real Estate fell 10.1 percent to 208.20 rupees after it posted late on Friday a 93 percent drop in profit for the year ended March 31.

* Simplex Projects Ltd rose 5 percent to 134.95 rupees after its board said over the weekend it would meet on June 13 to consider raising funds through a preferential issue of shares to non-promoters.

Tags: BSE sensex, Global Markets, India Finance

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