The BSE Sensex fell for a sixth consecutive session on Friday to its lowest close in four months as blue chips such as State Bank of India continued to reel from concerns about political instability and doubts over the prospect of future rate cuts.
Falls also tracked Asian shares which hovered near their lowest in nearly three months as Cyprus scrambled to avoid a meltdown of its banking system and a possible exit from the euro zone.
The RBI's cautious stance on future rate cuts and the DMK's withdrawal in the ruling UPA coalition have left investors concerned about economic growth and the prospect of additional fiscal reforms, with benchmark indexes now hovering close to breaking their 200-day moving averages.
"Stocks may start looking attractive if more falls come, but political instability and developments overseas like Cyprus do not help" said Paras Adenwala, Managing Director & Principal Portfolio Manager, Capital Portfolio Advisors.
Political developments have made the situation very hostile, with every rise used as a selling opportunity, added Adenwala.
The BSE Sensex fell 0.3 percent, or 57.27 points, to end at 18,735.60.
The index fell 3.6 percent for the week, marking a second week of losses.
The Nifty fell 0.13 percent, or 7.40 points, to end at 5,651.35, falling for a sixth day, and marking its biggest losing streak since seven sessions of falls ending November 19, 2012.
The Nifty also fell 3.8 percent for the week, marking its biggest weekly loss since Dec 18, 2011.
ICICI Bank Ltd (ICBK.NS) fell 0.7 percent, while State Bank of India ended 1.7 percent lower on fears the Reserve Bank of India may not ease interest rates in May after it issued a cautious statement on monetary policy on Tuesday, dealers said.
Dealers added that risk aversion is also weighing on blue chips like Tata Motors Ltd (TAMO.NS), which fell 1.2 percent after earlier rising as much as 1.7 percent even as unit Jaguar Land Rover Ltd (JLR) said on Thursday it did not expect sales in China to be hurt by the new fuel standard norms.
Shares in Oracle Financial Services Software Ltd (ORCL.NS) fell 3.8 percent, tracking a slump in parent company Oracle Corp (ORCL.O) on Thursday after the U.S. software maker's third-quarter revenue fell far short of expectations.
Shares of other IT companies were also under selling pressure on weak market sentiment. Tata Consultancy Services Ltd (TCS.NS) dropped 1.1 percent, while Infosys Ltd (INFY.NS) shares closed down 0.3 percent.
Dr. Reddy's Laboratories Ltd (REDY.NS) fell 1.1 percent after Bank of America-Merill Lynch replaced it with Sun Pharmaceutical Industries Ltd (SUN.NS) in its model portfolio. Sun Pharma's shares also ended 1.3 percent lower.
However, defensive stocks rose in a volatile market with ITC Ltd (ITC.NS) ending 0.2 percent higher, marking a weekly gain of 1.2 percent.
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