Indian shares fell on Monday as banking stocks slid amid mixed expectations for an upcoming interest rate decision, while a relentless surge in domestic coronavirus cases added to investor worries.
Infections in India crossed 1.8 million on Monday after a record daily jump over the weekend which saw the country's interior minister testing positive.
The NSE Nifty 50 index ended 1.64% lower at 10,891.60, falling for the fourth straight session and clocking its worst one-day fall in nearly three weeks. The index had gained 7.5% in July.
The S&P BSE Sensex closed down 1.77% at 36,939.60.
Leading losses on the Nifty 50 was conglomerate Reliance Industries, which slipped 2.8% – its second straight daily fall – following a 140% rally since late March.
The Reserve Bank of India (RBI) is expected to announce its rate decision on Thursday and investors are not fully convinced it will cut rates this week, which caused a fall in lenders, one analyst said. Banks reap short-term treasury profits from rate cuts.
The Nifty private banking index fell the most among the 12 major sectors, ending 3.2% lower. HDFC Bank Ltd and Kotak Mahindra Bank fell 3% and 4.2%, respectively.
However, around two-thirds of economists in a Reuters poll expect the RBI to cut the repo rate by another 25 basis points to a record low of 3.50%. The RBI has already cut its key policy rate twice this year to soften the impact of the pandemic on a slowing economy.
A rally in automotive stocks fizzled by afternoon with the Nifty auto index settled 0.54% lower. Jaguar Land Rover parent Tata Motors was an outlier with an 8% rise.
Other Asian share markets were mixed as U.S. lawmakers struggled to hammer out a new stimulus plan, while European stocks opened modestly higher on Monday.
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