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MUMBAI (Reuters) - The BSE Sensex fell 1.6 percent on Monday to its lowest close this month, as jitters national elections may produce a split verdict sparked profit taking after a near 50 percent rally since early March.
Investors are worried neither the ruling Congress party coalition or the main opposition Bharatiya Janata Party-led group will win a clear majority on its own, leaving the possibility of a loose coalition of regional parties.
"The critical question for markets is will the election result in a stable government," Tushar Poddar, an analyst at Goldman Sachs, said.
The election results are due on Saturday, and exit polls after the month-long elections end on Wednesday are expected to keep trading volatile this week.
Energy giant Reliance Industries and government-run State Bank of India led the main index lower, but private-sector lenders ICICI Bank and HDFC Bank bucked the trend and rose.
The 30-share BSE index fell 1.63 percent, or 193.44 points, at 11,682.99, its lowest close since April 29 and followed a 2 percent drop on Friday.
The benchmark, which initially rose 1.3 percent, is still up 45.2 percent from its 2009 low in early March. Twenty-four of its components dropped, while in the broader market losers led gainers almost 2 to 1 on moderate volume of 409.4 million shares.
If a relatively stable coalition comes to power, shares are expected to resume their upward move as longer-term factors bode well for the Indian market.
"History suggests that as long as a stable coalition comes to power, the impact on sentiment and activity is likely to be positive," Poddar said.
Reliance Industries, which has the biggest weight in the main index, fell 2 percent to 1,859.35 rupees, while State Bank of India shed 4.9 percent to 1,260.70 rupees.
Private-sector lender ICICI Bank rose 0.6 percent to 523.45 rupees, while rival HDFC Bank edged up 0.1 percent at 1,144.80 rupees.
The 50-share NSE index fell 1.8 percent to 3,554.60 points.
* Unitech on 20.5 million shares
* Dish TV India on 18.4 million shares
* Ispat Industries on 12.4 million shares
* Ashok Leyland Ltd fell 5.4 percent to 20.90 rupees after the No. 2 truck and bus maker said its April sales plummeted 69 percent from the same month a year ago.
* Hindustan Unilever shed 2.9 percent to 226.05 rupees after India's biggest consumer goods maker posted on Sunday a 3.7 percent rise in net profit for the first three months of the year, but fell short of forecasts.
* Alembic Ltd dropped 7.7 percent to 36.40 rupees after the drug maker posted a net loss of 14.7 million rupees for the quarter ended March, compared with a net profit of 153.4 million rupees last year.
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