The BSE Sensex closed at its lowest in more than a week on Monday, its third straight day of retreat from record highs hit last week, as blue chips such as ICICI Bank fell on caution sparked by the start of a five-week long elections.
The main opposition Bharatiya Janata Party (BJP), widely tipped to form the next government, pledged on Monday to expedite foreign investment in most sectors except for multi-brand retail and revise the country’s nuclear doctrine.
Most of the policies outlined in BJP’s manifesto were read as prudent but investors remained sceptical about fast implementation and fiscal discipline in such projects.
Shares have rallied on hopes that BJP’s Narendra Modi, a more business-friendly candidate, is seen coming to power on promises of economic revival and jobs.
Weak institutional flows also weighed on sentiment. Overseas investors bought shares worth Rs. 232 crore on Friday, while domestic institutional investors sold stocks worth Rs. 1,125 crore.
Overseas investors have bought Indian shares worth $4.46 billion so far in 2014, driving shares higher.
NSE’s volatility index, or the Indian equivalent of the VIX fear gauge, ended 9.9 per cent higher, after earlier hitting its highest in nearly six months on rising fears of profit-taking after a recent rally.
“The BJP manifesto looks promising and diligent. Current bout of profit-taking might continue given we just made record highs and a lot of things are priced in,” said Deven Choksey, managing director at K R Choksey Securities.
The benchmark Sensex fell 0.07 per cent, or 16.05 points, to end at 22,343.45, its lowest close since March 28.
The broader Nifty rose 0.01 per cent, or 0.70 points, to end at 6,695.05.
India’s stocks, bonds and forex markets would be closed for a local holiday on Tuesday.
Falls also tracked lower global shares that slipped from last week’s six-year high on Monday as technology shares extended recent sell-off.
Release of Fed minutes on Wednesday and India’s industrial output data for February on Friday would be on watch as well.
Among blue chip stocks, ICICI Bank fell 1.7 per cent, while Maruti Suzuki lost 1.2 per cent.
Bharat Heavy Electricals fell 3.2 per cent after the state-run top power equipment maker reported on Saturday a 51 per cent fall in provisional net profit for the fiscal year ended March 31 to Rs. 3,228 crore.