Nifty hit as banks fall on rate cut worries

Nifty fell around 1% on Monday, dragged down by falls in lenders such as ICICI Bank as high oil prices are sparking fears of a delay in rate cuts from the RBI, and adding to caution ahead of the government's borrowing calendar due this week.

Oil supply disruptions from countries including Iran, Syria and Yemen have supported oil prices this year, with Brent crude rising 16% so far this year, though prices were slightly lower on Monday on hopes of a possible resumption in production from South Sudan.

Higher oil prices are adding to the caution over India's finances. The government is expected to say it will frontload its expected Rs 5,70,000 crore in borrowing for the 2012-13 fiscal year to the first half of the year.

"Inflation fears led by high oil prices are capping the chances of a rate in cut in April," said Jitendra Tolani, Institutional sales trader at Jaypee Capital Services.

The 50-share index Nifty was down 1.4%, with the expiry of March future and options contracts on Thursday further weighing on the index. The premium to spot prices has shrunk to single digits, compared to the 30-40 points seen last week.

ICICI Bank lost 3%, while Axis Bank was down 3.5%, helping drag down the Nifty bank index by 1.9%.