MUMBAI The BSE Sensex fell on Monday for the first time this year as investors took profit in recent outperformers such as State Bank of India after a four-day winning streak had sent indexes to two-year highs.
However, oil companies such as Hindustan Petroleum Corp (HPCL.NS) extended gains on expectations the government will gradually raise the price of diesel.
Markets were due for some consolidation after gaining in each of the four previous sessions of 2013 and ahead of industrial output data on Friday and corporate earnings due this month, traders said.
The underlying sentiment is still positive as the Reserve Bank of India (RBI) is widely expected to cut interest rates at its January 29 policy review, which could help revive flagging economic growth.
"Third-quarter earnings would not be great but it will probably be the last quarter of such earnings after which the outlook would improve significantly," said Gautam Trivedi, managing director and head of equities India, Religare Capital Markets.
"We expect a 50 basis points cut between now and March by RBI (Reserve Bank of India)," he added.
The BSE Sensex fell 0.47 percent, or 92.66 points, to end at 19,691.42, after gaining 1.84 percent in the previous four sessions. The index closed on Friday at its highest since January 6, 2011.
The broader Nifty ended 0.46 percent down, or 27.75 points, at 5988.40, below the psychologically important 6,000 level.
Goldman Sachs maintained its 'overweight' call on Indian stocks, with an end-2013 target for the NSE, or Nifty, of 7,000.
Investors took profits in recent out-performers, especially those that shone in 2012 and helped the BSE index rise 25.7 percent for the year.
State Bank of India ended 0.77 percent lower after gaining 4.24 percent this year as of Friday's close and 47.3 percent in 2012, while HDFC Bank (HDBK.NS) ended 1.64 percent down.
Oil and gas company Reliance Industries (RELI.NS) was also hit by profit-taking, ending 0.6 percent down after adding 2.7 percent so far this year.
Engineering company Larsen & Toubro Ltd (LART.NS) ended 2.45 percent lower on worries its October-December earnings would not be sturdy, given the slowing domestic economy.
L&T is focusing on ramping up overseas growth to offset the slowdown at home. It expects foreign markets to contribute up to 25 percent of revenue by 2016.
Among the gainers, state-run oil companies rose on expectations the government would soon announce a hike in fuel prices. Fuel subsidies in India are borne by the government, marketing and refining companies, as well as explorers.
Hindustan Petroleum Corp (HPCL.NS) ended 4.9 percent higher, while Bharat Petroleum Corp (BPCL.NS) rose 3.1 percent.
Separately, officials of state-owned oil companies told Reuters that they received the first tranche of 100 billion rupees on January 3 as part of a cash subsidy payout for the April-September period, and expect a second and third tranche of an equivalent amount this month.
Oil and Natural Gas Corp (ONGC.NS) shares ended 1.1 percent higher, having gained 6.4 percent in previous three sessions.
Shares of Maruti Suzuki (MRTI.NS), India's largest automaker, rose 2.5 percent after earlier hitting a four-year high on hopes earnings would improve due to rising sales of passenger vehicles, while margins were also seen increasing due to a depreciation in the Japanese yen.
CLSA's upgrade of Maruti to 'buy' from 'sell' also boosted the stock, traders said.
Steel companies gained after the government announced an increase in import duties for select steel products on Friday.
Steel Authority of India (SAIL.NS) gained 4.5 percent, while JSW Steel (JSTL.NS) ended 3.3 percent higher.
(Additional reporting by Abhishek Vishnoi; Editing by Prateek Chatterjee)