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MUMBAI (Reuters) - The BSE Sensex fell on Thursday, ending May with the worst monthly performance since November, after weak economic growth data reinforced concerns about the country's challenges at a time of intense global risk aversion.
India's economy grew at a nine-year low of 5.3 percent in the January-March quarter, with the data coming on a day when the rupee fell to a record low against the dollar, and as protesters took to the streets across India to demand the scrapping of a recent petrol price hike.
The BSE Sensex fell 6.4 percent in May, a month marked by intense worries about the fate of the euro zone, which is exposing India's vulnerabilities as an economy that needs capital inflows to bridge its current account deficit.
Foreign investors sold a net 4.33 billion rupees so far in May, and though they are not yet selling massively, their purchases of Indian assets has clearly slowed.
Investors from overseas bought a net of $619.3 million in debt and equity in May, far below the $7.2 billion in net inflows in February.
"India is primarily known as high growth economy, it deserves valuations premiums, the valuations are always at a premium to many of the other emerging nations. But if doubts emerge on growth itself then definitely it is not a good news," said Kaushik Dani, a fund manager at Peerless Mutual Fund.
The BSE Sensex fell 0.57 percent to close at 16,218.53 points, after earlier falling as much as 1.32 percent after the weak GDP data.
The Nifty index declined 0.54 percent to 4,924.25 points.
Trading was volatile, especially in the afternoon session because of the expiry of derivatives.
The weak economic growth data, however, is raising some hopes for a potential rate cut from the Reserve Bank of India at its mid-June policy meeting, though it was not enough to lift equity markets on Thursday.
Manufacturing remains particularly weak, with the sector shrinking 0.3 percent from a year earlier.
India's top engineering conglomerate Larsen & Toubro (LART.NS) declined 1.3 percent while capital goods maker Crompton Greaves CROM.NS fell 2.23 percent.
Tata Motors (TAMO.NS) shares fell 4.1 percent, bringing its falls in the past two sessions to 15.5 percent after disappointing investors with its earnings results on Tuesday.
Maruti Suzuki (MRTI.NS) shares fall 4.41 percent as the drop in the rupee is expected to raise the cost of imports and increase the cost of royalty payments.
Among other decliners, shares in cash-strapped Kingfisher Airlines' (KING.NS) fell 5 percent to a record low, a day after saying net loss more than trebled in the January-March quarter because of higher fuel prices and a weaker rupee.
ICICI Bank (ICBK.NS) dropped 4.16 percent as the stock went ex-dividend on Thursday.
However, shares in Hindalco Industries (HALC.NS) and Reliance Power (RPOL.NS) rose 2 and 3.4 percent, respectively, on media reports that a government panel had given permission to the two companies to start mining at two coal blocks allotted to them.
Additional reporting by Abhishek Vishnoi; Editing by Rafael Nam