MUMBAI The BSE Sensex and Nifty fell for a third straight session and closed at their lowest level in 1-1/2 weeks on Tuesday as lenders including HDFC Bank declined on worries over offloading of index futures by foreign investors.
Lenders led declines as they form a major portion of index futures, with HDFC Bank (HDBK.NS) losing 1.3 percent and State Bank of India ending down 1.9 percent.
Foreign institutional investors sold index futures worth 11.70 billion rupees ($193.21 million) over the previous two sessions, turning sellers for the first time since April 16.
Overseas buying in cash shares also slowed to 770 million rupees on Monday from 2.57 billion rupees on Friday.
A record-setting rally, driven by hopes of a revival in domestic economy and that the Bharatiya Janata Party led by Narendra Modi will form the next government, is now chipping off as investors chose to book profit amid the January-March earnings season.
Subdued earnings from key companies, including Sesa Sterlite SESA.NS, Jindal Steel & Power (JNSP.NS), Hindustan Unilever (HLL.NS) and Dabur India (DABU.NS), also dampened sentiment.
"There is a rotation of money happening in the earning season. Some profit-taking is underway which is not bad. Market is getting ready for the election results," said Deven Choksey, managing director at K R Choksey Securities.
The Sensex fell 0.73 percent, or 165.42 points, to 22,466.19, while the broader Nifty dropped 0.68 percent, or 46 points, to 6,715.25.
Both the indexes marked their lowest close since April 16.
Caution also prevailed ahead of the U.S. Federal Reserve's two-day meet starting Tuesday, coming at a time of continued tensions between Russia and the West over Ukraine.
Among other bank stocks, Kotak Mahindra Bank Ltd (KTKM.NS) fell 2.1 percent and IndusInd Bank Ltd (INBK.NS) ended down 1.7 percent.
Consumer goods maker Hindustan Unilever fell 3.2 percent following disappointment over its January-March sales volume growth.
Other consumer goods stocks also fell, with Dabur India falling 1.3 percent after its January-March earnings failed to beat estimates, and ITC Ltd (ITC.NS) ending down 0.5 percent.
Sesa Sterlite fell 1.3 percent after the company's January-March profit when adjusted for other income, lagged estimates.
Jindal Steel & Power slumped 7.5 percent after the company said its March-quarter profit fell by 47 percent to 4.03 billion rupees.
Hexaware Technologies (HEXT.NS) shares slumped 10.7 percent after the company's March-quarter profit declined 11.32 percent to 503 million rupees.
Bharti Airtel Ltd (BRTI.NS) fell 0.8 percent on caution ahead of its quarterly earnings later in the day.
However, IRB Infrastructure Developers Ltd (IRBI.NS) gained 2.8 percent after the company was selected as the preferred bidder to develop and run a toll road project worth 32 billion rupees ($528.45 million) in Maharashtra.
(Editing by Subhranshu Sahu)