Indian shares reversed direction to end modestly lower on Monday. With the rupee trading weak close to 55 levels, investors chose to take some profits off the table following recent sharp gains. The dominating factor at the moment is the strengthening of the U.S. dollar as signs of an improving U.S. economy led to speculation that the Federal Reserve is close to winding down its massive bond-buying program earlier than expected.
The benchmark 30-share Sensex hit a high of 20,444 early in the session before reversing direction to end down 62 points or 0.31 percent lower at 20,224, with 18 of its components declining. The broader Nifty index breached the psychological level of 6,200 to hit a 31-month high before erasing early gains to end at 6,157, down 30 points or 0.49 percent from its previous close.
Healthcare, consumer durable, banking and oil/gas stocks bore the brunt of the selling, while auto stocks extended recent gains on rate cut hopes. IT stocks also saw stock-specific buying, buoyed by the declining rupee and signs of improvement in the world's largest economy.
Banks lost ground amid reports the Reserve Bank of India is likely to review the 'fit and proper' criteria of all banking licenses following allegations of money laundering by online portal Cobrapost. HDFC Bank and Axis Bank slipped about 0.3 percent each, SBI eased 0.4 percent and ICICI Bank lost 1.6 percent.
Ranbaxy led the decliners in the health care sector, losing nearly 6 percent, while Lupin tumbled 4.4 percent on brokerage downgrades after rival Mylan Inc launched a generic version of the anti-cholesterol drug Tricor in the American market.
ACC, Dr Reddy's Laboratories, Cipla, ONGC, Jaiprakash Associates and Bharti Airtel all fell about 2 percent each.
Apollo Hospitals Enterprise plummeted 8 percent after announcing Q4 earnings. Sun Pharmaceutical Industries ended marginally lower after the High Courts of Gujarat and Mumbai approved the company's plan to transfer its domestic formulation business to Sun Pharma Laboratories.
ITC ended flat on brokerage upgrades after the cigarette maker reported quarterly earnings that beat estimates. Infosys rose over a percent after the software services exporter said it would challenge a Rs. 577-crore demand notice received from the Income Tax authorities for fiscal year 2009. Rival TCS closed up 0.3 percent and HCL Technologies advanced 1.3 percent.
Coal India rose 1.2 percent, Mahindra & Mahindra gained 1.4 percent, Maruti Suzuki advanced 1.9 percent and Bajaj Auto added 2.2 percent.
Elsewhere, other Asian markets ended broadly higher, extending a two-week rally, as an upbeat reading on U.S. consumer confidence bolstered optimism about the economic recovery in the world's largest economy. Adding to the positive sentiment, the Japanese government upgraded its assessment of the economy for the first time in two months, saying it expects economic recovery to resume gradually, supported by improvement in confidence and export conditions as a weak yen helped revive the country's exports and factory output.
European stocks were modestly higher, while trading in the Dow futures pointed to a flat open.
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