Sensex closes below 14,000 mark

Financial stocks fancied by foreign portfolio investors led the fall,but auto and cement stocks bucked the trend after auto sales rose for the fifth consecutive month and investors bet on infrastructure spend by the government.

“There is a temporary halt to the fund pouring in from FIIs,” said Deven Choksey,chief executive of brokerage KR Choksey,referring to foreign institutional investors. “Global investors are taking money home.”

The main stock index dropped 2.83 per cent,or 401.30 points,lower at 13,769.15 points,its lowest close since May 26. Twenty-four components ended in the red. It fell as low as 13,701.76 during trade.

“Global sentiments are negative no doubt,but more than that the market was overdue for a correction,” Choksey said.

The benchmark,which has risen in 16 out of the last 17 weeks,has fallen 7.7 per cent so far this week after the budget disappointed investors on Monday. It is still up 42.7 per cent this year.

Foreign funds have put in just $211.4 million this month after net purchases of close to $8 billion between mid-March and mid-June when the benchmark almost doubled.

Traders said investors turned wary about financial stocks on concerns heavy government borrowing could harden bond yields and erode profits of banks,who are the biggest buyers of government paper.

State Bank of India Chairman O.P. Bhatt said on Tuesday interest rates could harden in six months as demand for loans picks up.

Shares in State Bank,the country’s biggest lender,fell 3 per cent to Rs 1,587 and ICICI Bank dropped 5.8 per cent to 654.55,their lowest close since mid-May.

The bank index fell 4.1 per cent to its worst close since the ruling coalition won a bigger election mandate in May.

“Corporate earnings will be the next driver for the market,in the short term. They are expected to be better than the previous quarter,” said Vikas Khemani,co-head institutional equities at Edelweiss Securities.

“But for a longer rally it depends on how the government takes the growth momentum forward.”

Outsourcing bellwether Infosys Technologies is expected to report on Friday its quarterly earnings rose 7.3 per cent on year.

Auto stocks got a fillip from the government’s focus on the farm sector,which could boost demand for tractors and utility vehicles while increased allocation for urban schemes will help sales of buses,traders said.

Top truck and bus leader Tata Motors climed 0.5 per cent to Rs 281.15,No. 1 car producer Maruti Suzuki rose 2.1 per cent to Rs 1,102.95 and top motorcycle maker Hero Honda Motors firmed 1.5 per cent to Rs 1,459.20.

Leading cement maker ACC led cement makers up,rising 3.1 per cent to Rs 786 on fund buying. Ambuja Cements climbed 2.4 per cent to Rs 93.45.

The broader 50-share NSE index ended down 2.93 per cent at 4,078.90.