Reuters

Mumbai

Indian shares fell yesterday, retreating from record highs hit earlier in the session as investors pared positions in blue-chips such as Tata Motors after overseas investors marked their first sale of cash shares in three weeks.

Foreign institutional investors sold Indian shares worth Rs1.02bn ($16.5mn) on Tuesday, marking their first sale since October 28.

Overseas investors have been key drivers of the stock market rally this year, buying a net $15.47bn worth of shares so far in 2014, according to regulatory data. But caution is now beginning to set in ahead of the winter session of the parliament scheduled to begin next week, when Prime Minister Narendra Modi’s government is expected to push a slew of reforms including goods and services tax.

Investors are also looking forward to the Reserve Bank of India’s policy review on December 2, while also tracking global factors, including minutes of the US Fed’s policy meeting due later this week.

“FIIs are making good profit on Indian shares after a long time, so expect 3-5% correction by December-end due to profit taking,” said G Chokkalingam, founder of Equinomics, a research and fund advisory firm.

The BSE index fell 0.46% after hitting an all-time high of 28,294.01 earlier in the day.

The NSE index settled down 0.52% after rising to a record high of 8,455.65.

Blue-chips led falls amid profit-taking. The 50-share NSE index has gained 35.2% so far this year, making India the best performing equity market in Asia during the period. Tata Motors fell 2.2%, while Sun Pharmaceutical Industries ended lower 1.9%. ITC lost 0.7%, while Tata Steel ended 3.2% lower. State bank of India lost 1.2% after rising 8.3% in the previous three sessions.

Reliance Industries fell 1.1%, Oil and Natural Gas Corp lost 1.7%, and Cairn India declined 2.7%.

Among gainers, consumer goods stocks rose on hopes falling inflation would lift spending, while lower raw material costs would aid margins.

Hindustan Unilever rose 1.1% and Britannia Industries advanced 2.1%.

Meanwhile the rupee hit an 8-1/2 month low yesterday as global gains in the dollar ahead of the release of US Federal Reserve minutes later in the day and slumping crude prices spurred oil firms to accelerate their greenback purchases.

Fed minutes come amid rising expectations the US central bank is moving towards eventual rate hikes, in contrast to the European Central Bank or the Bank of Japan. Any US rate hikes could end up hitting emerging market currencies such as the rupee, despite the accommodative stances in countries outside the US.

But traders say relatively better economic fundamentals in India could protect the rupee from steep falls compared with other emerging market currencies.

“The dollar demand from oil companies should continue at least till the end of the month,” said Anish Vyas, a currency analyst at Angel Securities in Mumbai.

“However, hopes of rate cuts and positive reforms from the government should limit any major fall in the rupee.”

The partially convertible rupee closed at 61.96/97 per dollar versus its previous close of 61.74/75, after earlier touching a low of 61.9950, its weakest level since March 4.