Sensex edges lower ahead of RBI policy review

MUMBAI, Sept 29 (Reuters): The BSE Sensex fell on Monday as rate-sensitive firms such as ICICI Bank Ltd felt the pinch a day ahead of the Reserve Bank of India's policy review, but exporters such as IT firms and drugmakers cashed in on the rupee's weakness.

The RBI is widely expected to keep interest rates on hold on Tuesday, with the focus expected to be on the tone of its policy statement as Governor Raghuram Rajan has reiterated his commitment to tame inflation.

Adding to the caution, foreign investors were net sellers for four consecutive sessions, totalling over $500 million, according to exchange data, their biggest selling streak since May.

"Governor Rajan is not in a hurry to cut rates but the RBI has nearly nine months or so before the Fed raises rates. During this period the central bank is expected to use proactive measures to loosen rates and let the economy stabilise," said Deven Choksey, managing director at KR Choksey Securities.

Concerns about earlier-than-expected US rate hikes are expected to increase after an upward revision to US economic growth estimates in the second quarter, while political unrest in Hong Kong could weigh on regional shares.

The benchmark BSE Sensex ended down 0.11 per cent, or 29.21 points, at 26,597.11, a fourth session of fall in five.

The broader Nifty lost 0.12 per cent, or 9.95 points, to close at 7,958.90.

Interest rate sensitive stocks led the declines. The tone of RBI's statement could be important in setting expectations about when the central bank would lower interest rates.