MUMBAI The BSE Sensex fell for a second session on Friday to its lowest close in two months, led by declines in HDFC after Goldman Sachs downgraded the stock to "sell", while ITC fell on fears of a hike in excise duty for tobacco in the upcoming budget.
Shares are expected to be range-bound ahead of the 2013/14 budget, to be unveiled on February 28, and investors will watch whether the finance minister will manage to impose fiscal discipline even as the government tries to revive growth.
India has targeted a fiscal deficit of 4.8 percent of gross domestic product for the year starting in April, but budget details will also be key given an austerity push could add to inflationary pressures, hampering chances for rapid interest rate cuts.
Global risk factors will also be key given domestic shares on Thursday posted their biggest fall since July on worries about whether the U.S. Federal Reserve will continue its bond buying programme.
"One should closes watch how the finance misister balances populist and pragmatic expectations, especially that on fiscal consolidation," said Vijay Kedia, director at private wealth management firm Kedia Securities.
Announcements have to turn into action otherwise global risk aversion might lead to redemptions even at FII desks, Kedia added.
The benchmark BSE Sensex fell 0.04 percent, or 8.35 points, to end at 19,317.01, after falling 0.77 percent for the week, marking a fourth week of falls.
The broader Nifty fell 0.03 percent, or 1.95 points, to end at 5,850.30, also ending 0.63 percent lower for the week.
Housing Development Finance Corp Ltd (HDFC.NS) fell 1.9 percent, its biggest single day fall since January 11, after Goldman Sachs cut its rating on to "sell" from "neutral", on expectations that Asia's third-largest economy would recover at a "modest" pace and the prospect of rising competition.
ITC Ltd (ITC.NS) fell 1.6 percent, marking a third day of losses, on continued fears of a hike in excise duty in the upcoming budget, as the government aims to increase its tax collections to offset some of its revenue shortfall.
Jet Airways (JET.NS) fell 5.7 percent on continued concerns about whether the carrier will clinch a stake sale to Abu Dhabi-based carrier Etihad Airways. Shares have fallen 14.5 percent for the week - their biggest weekly loss since August 28, 2012.
Aviation stocks including Spicejet (SPJT.BO) also fell on concerns of increased competition after Malaysia's AirAsia Bhd (AIRA.KL), Asia's largest budget carrier, on Wednesday announced plans to launch a regional airline in India in a venture with the Tata group.
Spicejet (SPJT.BO) fell 2.25 percent while Kingfisher Airlines (KING.NS) ended 3 percent higher on hopes that its controlling stakeholder United Breweries Holdings Ltd (UBHL.NS) will lend to the ailing carrier.
Among other stocks that gained, Sun Pharmaceutical Industries (SUN.NS) rose 1.8 percent after Credit Suisse said the drug maker's subsidiary Taro Pharmaceutical Industries (TARO.N) has pushed through price increases in three products last week, citing industry checks.
Infosys (INFY.NS) gained 1.2 percent, while Tata Consultancy Services (TCS.NS) ended 0.3 percent higher on hopes of incentives for exporters in the budget.
(Editing by Sunil Nair)