Sensex slips in special Diwali trading session

A broker reacts while trading at a stock brokerage firm in Mumbai November 11, 2008.

MUMBAI (Reuters) - The BSE Sensex fell for a fourth consecutive day in Tuesday's short Diwali trading session as banks and automotive stocks fell a day after data showed a surprise contraction in the country's industrial output.

In the annual session to celebrate Diwali, which typically sees stocks gain as Indians view it as a lucky day to make purchases, major blue-chip stocks dragged down the Sensex 0.3 percent.

State Bank of India (SBI.NS), the country's largest lender, fell 0.9 percent to 2,171.35 rupees, while rival HDFC Bank (HDBK.NS) shed 0.7 percent to end at 647.05 rupees. Tata Motors (TAMO.NS), the country's biggest automaker, closed 1.1 percent lower at 277.55 rupees.

India's economic gloom deepened on Monday with an unexpected fall in industrial production, a slump in exports and higher retail inflation, putting pressure on the government to push ahead with reforms as growth stalls.

DLF (DLF.NS) fell 1.3 percent to 202.85 rupees, a day after India's largest developer posted a 63 percent fall in net profit for the July-September quarter on slowing home sales.

Shares in L&T Finance Holdings Ltd (LTFH.NS), a unit of infrastructure giant Larsen & Toubro (LART.NS), surged 16.1 percent, continuing a strong run of gains, on hopes it will benefit from a fresh allocation of banking licences.

The Sensex closed down at 18,618.87 points, after falling 1.2 percent over the previous three sessions.

The 50-share Nifty also fell 0.3 percent.

Trading will resume on Thursday, a day after India is set to release data for October wholesale price inflation.

(Reporting by Henry Foy; Editing by Subhranshu Sahu)