Sensex ends down as investors turn cautious; SBI falls 8 pct

By Rajesh Kurup

MUMBAI (Reuters) - The BSE Sensex closed down on Wednesday, reversing early gains, as investors turned cautious and booked profits after a recent rally that pushed up the benchmark index to its highest close in nearly seven months in the previous session.

The 30-share BSE index closed down 1.54 percent, or 283.36 points, at 18,145.25, with 24 of its components in the red.

The market is now looking towards the budget and the Reserve Bank of India (RBI) policy review, both due in mid-March, for positive triggers, dealers said.

Financials led the losses with the country's top lender State Bank of India closing 8.05 percent lower at 2,255 rupees, while its private sector rival ICICI Bank settled 3.39 percent lower at 957.70 rupees.

"The market had a run-up ahead of the budget itself and is seeing some correction now," said Deven Choksey, managing director of K. R. Choksey.

The central bank reviews policy on March 15, and the government will unveil its annual budget the following day.

The market will bounce back as the budget is likely to have some positive announcements, while the central bank may cut interest rates at its policy review, Choksey said.

In the broader market, there were 1,268 losers against 227 gainers on volume of 1.30 billion shares.

"The outlook for the market is firm. There is enough liquidity that could lead to further upside," said Suresh Parmar, associate vice president institutional equities at KJMC Capital Markets.

He said that the market could witness high volatility on account of expiry of derivatives contract expiry on Thursday.

The 50-share NSE index ended down 1.82 percent at 5,505.35.

"Market is set to move up. The rollovers so far suggest investors are pretty aggressive, confident and building positions ahead of the budget-month," Samir Gilani, head of equities and derivatives at Mape Securities said.

"There is a strong institutional support to the market," said Gilani.

Kingfisher Airlines ended lower 5.98 percent after gaining in early trade after banking sources told Reuters its lenders have not agreed to extend further loans to the debt-crippled carrier.

Several newspapers had reported earlier Wednesday that State Bank of India (SBI) would throw a lifeline to Kingfisher, which is majority-owned by liquor baron Vijay Mallya, giving figures ranging from 2.0 to 16.5 billion rupees.

Shares in Jet Airways India closed down 9.17 percent and Spicejet down 8.89 percent, after Bank of America Merrill Lynch retained its "underperform" rating on the two carriers.

The U.S.-based investment bank cited slowing traffic growth, strong capacity addition by low-cost carriers and insufficient growth in yields for being "negative" on the sector.

Energy major Reliance Industries fell 1.2 percent on profit taking, after it rallied in the previous session on expectations of announcement of petrochemicals joint venture.

Post trading hours on Tuesday, Reliance, which has the heaviest weight on the main index, said it had finalised a joint venture with Sibur, Russia's largest petrochemical company, to set up a butyl rubber plant in India.

Sun Pharmaceutical ended up 1.08 percent after the U.S. Food and Drug Administration said it reached a temporary deal to import a cancer drug from the Indian drugmaker.

The euro and European shares edged lower on Wednesday after economic data suggested the euro zone may slide back into recession, hurting the global economic outlook, while concerns about the sustainability of the latest Greek bailout deal also weighed.

STOCKS THAT MOVED

* Welspun Corp fell 3.56 percent. HSBC downgraded the steel pipes maker to 'neutral' from 'overweight' and cut target price to 165 rupees from 265 rupees, after it reported a lower-than-expected sales volume.

* NTPC Ltd closed down 1.8 percent, after Deutsche Bank downgraded the power producer to 'hold' from 'buy', citing execution delays, challenges in coal logistics and unanticipated policy changes as risks for the state-run company.

TOP 3 BY VOLUME

* Lanco Infratech with 134 million shares

* Unitech on 67.44 million shares

* Sulzon Energy on 51.64 million shares

(Reporting by Rajesh Kurup; Editing by Subhadip Sircar)