BSE Sensex drops 0.9 pct; banks, Tata Steel fall

By Ami Shah

MUMBAI (Reuters) - The BSE Sensex shed 0.9 percent on Thursday as investors locked in profits in stocks such as State Bank of India and ICICI Bank that had rallied this month.

The tone was set by a pull back in Asian markets and signs of fatigue after a rally this year. A faster-than-expected 9.1 percent rise in India's industrial output in September from a year ago also failed to lift the market.

"The market had moved up in anticipation of good news. So, with evidence coming in that recovery is on track, early investors are booking profits," said A.V. Srikanth, executive director of private wealth management at Anand Rathi Financial Services.

The 30-share BSE index closed down 0.91 percent, or 153.57 points, at 16,696.03, after rising 2.5 percent on Wednesday. Seventeen of its components declined.

The benchmark is up 5 percent this month after it shed 7.2 percent in October, when it had registered its worst monthly fall.

"The volatility we are seeing is a tussle between people who have come in earlier and are wanting to book profits and those who missed the rally earlier and are trying to enter now," Srikanth said.

For the year so far, the index is up 73 percent, powered by foreign fund inflows of $14.6 billion.

Tata Steel fell as much as 3.5 percent after the company approved a new convertible bonds offer in exchange for an existing $875 million securities and lowered the share conversion price to 605.53 rupees from 733 rupees.