Thursday November 12, 05:00 PM

BSE Sensex drops 0.9 pct; banks, Tata Steel fall

By Ami Shah

MUMBAI (Reuters) - The BSE Sensex (^BSESN : 17519.26 +29.18) shed 0.9 percent on Thursday as investors locked in profits in stocks such as State Bank of India (SBIN.NS : 2029.65 +2.35) and ICICI Bank (ICICIBANK.NS : 963.65 +15.1) that had rallied this month.

The tone was set by a pull back in Asian markets and signs of fatigue after a rally this year. A faster-than-expected 9.1 percent rise in India's industrial output in September from a year ago also failed to lift the market.

"The market had moved up in anticipation of good news. So, with evidence coming in that recovery is on track, early investors are booking profits," said A.V. Srikanth, executive director of private wealth management at Anand Rathi Financial Services.

The 30-share BSE index closed down 0.91 percent, or 153.57 points, at 16,696.03, after rising 2.5 percent on Wednesday. Seventeen of its components declined.

The benchmark is up 5 percent this month after it shed 7.2 percent in October, when it had registered its worst monthly fall.

"The volatility we are seeing is a tussle between people who have come in earlier and are wanting to book profits and those who missed the rally earlier and are trying to enter now," Srikanth said.

For the year so far, the index is up 73 percent, powered by foreign fund inflows of $14.6 billion.

Tata Steel (TATASTL.BO : 638.6 +5.7) fell as much as 3.5 percent after the company approved a new convertible bonds offer in exchange for an existing $875 million securities and lowered the share conversion price to 605.53 rupees from 733 rupees.

"I think the company was not confident of its stock reaching that price, which means it would face a big redemption in a single year," said Pawan Burde, sector analyst at Mumbai-based PINC Research.

"This probably reflects their concerns over growth amid the downturn in the global steel industry," he said.

The stock closed 2.8 percent lower at 511.85 rupees.

State Bank closed 3.5 percent lower at 2,295.90 rupees while ICICI and HDFC Bank shed 3.2 percent and 1.1 percent respectively.

"The near-term outlook for banks is uncertain," Srikanth said. "For banks, credit growth is yet to revive; treasury gains may not stay and higher provisioning may hit profits for 1-2 quarters."

The sector index closed 2.5 percent lower, but is up 8.5 percent this month.

Infosys Technologies (INFOSYS.BO : 2784.75 +45.6) rose 0.6 percent to 2,322.70 rupees after its business process outsourcing arm said it agreed to acquire U.S.-based McCamish Systems.

"IT stocks look good with hiring plans picking up, demand outlook improving and on earnings visibility," said Mehul Dedhia, assistant vice-president of sales at brokerage Sharekhan.

Sector leader Tata Consultancy (TCS.NS : 825.85 -14.85) and smaller rival Wipro (WIPRO.NS : 728.95 -10.15) gained 1.4 percent each.

In the broader market, losers outpaced gainers in a ratio of 1.2:1 on relatively higher volume of 516 million shares.

The 50-share NSE (^NSEI : 5245.9 +14) index closed 1 percent lower at 4,952.65.

STOCKS THAT MOVED

* Wind turbine maker Suzlon Energy rose 2.4 percent to 69.35 rupees after it was added to the MSCI India index.

* Drug maker Glenmark Pharmaceuticals (GLENMARK.NS : 242.2 -0.9) and Power Grid Corp shed 3.8 percent and 1.6 percent respectively, as they were removed from the MSCI India index.

* Indiabulls Real Estate dropped 1.8 percent to 239.20 rupees after about 16 percent of its equity changed hands on the Bombay Stock Exchange.

MAIN TOP 3 BY VOLUME

* Indiabulls Real Estate on 68 million shares

* Suzlon Energy on 20.2 million shares

* Mahindra Satyam (SATYAM.BO : 97.75 +0.05) on 13.3 million shares

(Additional reporting by Prashant Mehra; Editing by Ranjit Gangadharan)