BSE Sensex down 0.7 pct; metal makers retreat

People watch a large screen displaying India's benchmark share index on the facade of the Bombay Stock Exchange (BSE) building in Mumbai January 24, 2008.

MUMBAI (Reuters) – The BSE Sensex shed 0.7 percent on Tuesday, tracking world equities, as investors locked gains after the benchmark closed at a 2-½-month high in the previous session.

Financials and metal producers led the decline.

Metal makers which had led the rise on Monday, declined as base metal prices retreated as market frenzy over China's promise of a more flexible currency eased and investors realized Beijing was unlikely to allow any sharp rises in the yuan.

Financials dropped, with the banking sector index shedding 0.8 percent after rising 2 percent on Monday.

The 30-share BSE index declined 0.71 percent or 126.86 points to 17,749.69, with 27 of its components losing ground.

"People are booking profits after the recent spike," said Arun Kejriwal, director of research firm KRIS.

Foreign funds have been net buyers since seven sessions to June 18, and have invested a net $1 billion so far this month, pushing the benchmark index 4.8 percent higher.

Last month, they had pulled out $2 billion from Indian stocks as euro zone's fiscal troubles hit their risk-taking capacity.

"FIIs (foreign institutional investors) are buying for now, but how long will the trend continue is the question," said Kejriwal.

He said the euro and euro zone developments would set the market's direction in the near term.

Non-ferrous metals producer Sterlite Industries and aluminium maker Hindalco declined 2.7 percent and 1.4 percent respectively.

Tata Steel, the world's eighth largest steelmaker, shed nearly 2 percent.

Top lender State Bank of India dropped 1.3 percent while leading private-sector rivals ICICI Bank and HDFC Bank declined 0.9 percent and 0.6 percent respectively.

Infosys, the country's No. 2 software services firm, declined 1.2 percent after rising 2.4 percent over the past four sessions.

Rivals Tata Consultancy Services and Wipro shed nearly 1 percent and 1.2 percent respectively.

In the broader market, declining shares outpaced advancing ones in the ratio of 1.2:1 on a relatively moderate volume of 373 million shares.

The 50-share NSE index shed 0.7 percent to 5,316.55 points.

At 1014 GMT, MSCI's all-country world index was down 0.8 percent, while the more volatile emerging markets index declined 1.2 percent.

STOCKS THAT MOVED

* Yes Bank(YESB.BO) dropped 3.5 percent to 271.80 rupees after Dutch lender Rabobank sold about 11 percent in the private-sector bank.

* State-run oil marketing companies Indian Oil Corp(IOC.BO), Bharat Petroleum Corp(BPCL.BO) and Hindustan Petroleum Corp(HPCL.BO) rose between 3.6 percent and 4.4 percent after the federal oil minister said a panel of ministers will meet on Friday to decide on fuel prices.

* MTNL climbed 1.7 percent to 64.80 rupees, after an unsourced report by the Financial Express newspaper said Mukesh Ambani-controlled Reliance Industries was in initial talks with the state-run telecoms firm to market its 3G services as a franchisee.

MAIN TOP 3 BY VOLUME

* Yes Bank on 41.9 million shares

* Reliance Natural Resources on 11.2 million shares

* Hindustan Motors on nearly 9 million shares

(Editing by Malini Menon)

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