Indian shares fell for the fourth straight session on Monday as banking stocks tumbled on mixed expectations for an upcoming interest rate decision, while surging domestic coronavirus cases also dented sentiment.
Infections in India crossed 1.8 million on Monday after a record daily jump over the weekend, which saw the country’s interior minister, a close aide of Prime Minister Narendra Modi, testing positive.
The Nifty index, which gained 7.5% in July, fell 0.89% to 10,976.10 by 0430 GMT, while the Sensex was 1% lower at 37,232.30.
Private sector lenders HDFC Bank Ltd and Kotak Mahindra Bank fell 1.7% and 3%, respectively. The Nifty banking index was down 1.34%.
India’s central bank, which has cut its key policy rate twice this year to soften the impact of the pandemic on a slowing economy, is expected to announce its monetary policy decision later this week.
An interest rate cut could help banks boost their treasury gains from government bonds at a time when lending has turned sluggish, said Deepak Jasani, head of retail research at HDFC Securities in Mumbai.
“The expectation of a rate cut is not very high at this point,” Jasani said. “A ‘no rate-cut’ negativity is … pulling down the financials.”
Meanwhile, India’s factory slump deepened in July as coronavirus lockdowns weighed on demand and output, raising the chances of a sharper economic contraction, a private business survey showed.
The biggest drag on the Nifty 50 was conglomerate Reliance Industries Ltd, which fell 2.3% – its second straight daily decline – following a breathless 140% rally since late March.
Automotive stocks gained after a slew of encouraging sales and earnings reports, with Tata Motors rising 5.5%.
Other Asian share markets were mixed as U.S. lawmakers struggled to hammer out a new stimulus plan.