Indian shares fall; RBI cautious on further rate cuts

* BSE index falls 0.56 pct; NSE ends 0.41 pct lower
* State-owned banks, realty stocks fall on RBI's guidance
* Axis Bank shares gain; stake sale attracts strong demand

By Abhishek Vishnoi
MUMBAI, Jan 29 (Reuters) - Indian shares fell to a one-week
low on Tuesday, led by a decline in rate-sensitive stocks such
as HDFC Bank, after India's central bank lowered its key policy
rate, but made further rate cuts conditional on government moves
to control fiscal deficit.
The Reserve Bank of India cut the policy repo rate
by 25 basis points and even unexpectedly reduced
the cash reserve ratio (CRR), to help support an
economy set to post its slowest annual growth rate in a decade.

The central bank stressed that halting a slide in growth had
become critical, but it went on to list constraints, notably
worryingly high current account and fiscal deficits, and the
risk that inflation could flare again.
Analysts said the government's action around the budget is
important to predict the near-term movement of the markets.
"Policy was broadly in-line with market expectations, but
there has been a sense of caution mainly due to widening current
account deficit and inflation," said Kaushik Dani, Fund Manager
at Peerlees Mutual Fund.
"The way budget pans out will determine how RBI formulates
its March policy," added Dani.
The benchmark BSE index fell 0.56 percent, or
112.45 points, to end at 19,990.90, closing below the
psychologically important 20,000 mark.
The broader NSE index fell 0.41 percent, or 24.90
points, to end at 6,049.90, marking its lowest close in a week.
RBI's caution comes ahead of what is expected to be a
volatile week, with continued earnings results and the expiry of
derivatives on Thursday, while the Federal Reserve is set to
conclude its two-day meeting on Wednesday
Rate-sensitive stocks fell after the RBI made further rate
cuts conditional on government's efforts towards fiscal
consolidation, making hopes of aggressive easing cycle this year
highly improbable.
Among banking stocks, HDFC Bank fell 2.7 percent ,
while State Bank of India ended 1.2 percent lower.
Real estate developer DLF fell 1.2 percent, while
Tata Motors fell 1.4 percent.
Oil and gas stocks declined on profit-taking, with Oil and
Natural Gas Corp Ltd falling 0.5 percent, having
gained 25 percent in January after the government's move to
allow higher diesel prices and due to expected changes to gas
pricing.
Reliance Industries fell 1.6 percent, marking its
fourth day of losses, on fresh concerns over its gas output from
KG D6 block, dealers say.
Century Textiles & Industries Ltd shares ended 3.9
percent lower after the company reported a loss of 291.9 million
rupees in Oct-Dec earnings.
However, among stocks that gained, India's Axis Bank
ended 4.4 percent higher as dealers cited good demand
for a share sale of up to $1 billion.
Adani Ports and Special Economic Zone Ltd rose 6.6
percent after the company said it would sell a majority stake in
Australia's Abbot Point port to the Adani family.

Adani Port's stake sale in its Australian port would reduce
the Indian company's consolidated debt by around 110 billion
rupees ($2.04 billion), while the reinvestment of the cash flows
for domestic growth opportunities would be a positive, brokerage
Edelweiss says in an email to clients.
Idea Cellular shares ended 0.9 percent higher
ahead of earnings, later in the day.

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FACTORS TO WATCH
* Euro steadies vs dollar, scope for rally to resume
* Brent holds steady above $113 on positive U.S. data
* Shares, oil steady before U.S. data, Fed meeting
* Foreign institutional investor flows
* For closing rates of Indian ADRs

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(Additional reporting by Manoj Dharra; Editing by Anand Basu)