BSE Sensex eases in choppy trade, Citi plan helps

MUMBAI (Reuters) – The BSE Sensex shed 0.14 percent on Monday in choppy trade, with the U.S. government's rescue package for the troubled Citigroup bolstering the market after it fell sharply at the start.

Traders said the $306 billion deal to help Citigroup tackle some of its toxic debt calmed worries the U.S. bank may come under pressure to liquidate some of its large holdings in Indian companies.

However, investors were unwilling to build positions just yet with the outlook marred by concerns of an economic slowdown and as the central bank dragged its feet on an expected easing of monetary policy to support growth.

Financial stocks such as State Bank of India , ICICI Bank and HDFC Bank led the fall as traders had been expecting an interest rate cut over the weekend but it failed to materialise.

"Despite the rescue of Citi by the U.S. government, there is no respite for markets. It is the broader crisis that is engulfing the global economy," said Hitesh Agrawal, head of research at Angel Broking.

"Only time can solve the situation," he said.

Finance Minister Palaniappan Chidambaram said on Monday India's monetary policy was now biased towards stimulating growth in the face of the global financial crisis and the Reserve Bank of India (RBI) would lower rates once inflation starts slowing.

Addressing economic editors in New Delhi, he said the government may have to revisit and revive pending reforms and hoped credit flows to improve by the end of November or December.

The 30-share BSE index ended down 12.09 points at 8,903.12. It fell more than 2 percent early and rebounded to be up over 1 percent after the Citigroup rescue plan was announced, only to backtrack later.

Jigar Shah, senior vice president at Kim Eng Securities, said Citigroup held stake in mortgage firm Housing Development Finance Corp and was a key client for outsourcer Tata Consultancy Services.

"So if Citi had a problem, these companies could also have been affected," he said.

The U.S. government agreed to prop up Citigroup, with more than $300 billion to avoid a collapse that could have wrought financial havoc around the globe.

HDFC fell 1.84 percent to 1,373.60 rupees.

Software exporters added small gains after the bailout of Citigroup. Banks are key clients of Indian outsourcing firms.

Tata Consultancy Services rose 2.8 percent to 520.70 rupees and Infosys Technologies gained 1 percent to 1,196.20 rupees.

The BSE index, which has fallen for eight of the last nine sessions, has lost 56.1 percent so far this year, making it among the worst performers in Asia.

Seventeen of its components fell, while in the broader market losers led gainers 1,386 to 1,065 on moderate volume of 223 million shares.

The 50-share NSE index ended 0.55 percent up at 2,708.25 points.

State Bank of India, the country's largest lender, fell 3 percent to 1,147.30 rupees, while smaller rivals ICICI Bank shed 3.9 percent to 322.55 rupees and HDFC Bank fell 2.9 perccent to 831.55 rupees.

India's RBI has cut its main lending rate by 150 basis points to 7.5 percent in the past two months, and slashed banks' cash reserve requirement by 350 basis points to 5.5 percent, but consumer spending has remained sluggish.

Annual inflation was at 8.90 percent in early November, sharply down from a peak of 12.91 percent in August, helped by falling prices of commodities and crude oil.

Metal producer Sterlite Industries dropped 1.9 percent to 214.60 rupees after a company official said it expected a month-long shutdown at a copper smelter in south India, after a breakdown.


STOCKS THAT MOVED

* Steel billet maker Godawari Power & Ispat fell more than 8 percent to 59.9 rupees, its lowest since June 2006, after the firm said it withdrew a proposal to buy back shares to conserve cash. The firm has also cut production of steel billets

and ferro alloys until further review.

* Fem Care Pharma Ltd closed 5 percent higher at 692 rupees after Dabur India said it had bought a 72.15 percent stake and would make an open offer for another 20 percent in line with takeover rules.


MAIN TOP 3 BY VOLUME

* Unitech at 16.6 million shares

* GVK Power at 12.0 million shares

* Suzlon Energy at 10.9 million shares