By Abhishek Vishnoi
MUMBAI (Reuters) - The BSE Sensex fell to its lowest close in 2-1/2 weeks on Monday, and has now declined in each of the four trading sessions of the year as caution prevailed ahead of financial results and key inflation data.
Also, foreign institutional investors sold 6.08 billion rupees worth of index futures and 180 million rupees of cash shares on Friday, dampening the sentiment.
Losses on Monday also tracked lower Asian shares after growth in China's services sector slowed sharply last month, raising concerns about the pace of recovery in the world's second-largest economy.
For India, the HSBC Services Purchasing Managers' Index INPMIS=ECI, compiled by Markit, showed a continued contraction in activity, falling to 46.7 in December from 47.2 in November as new orders dwindled, although firms hired at their fastest pace in five months.
The BSE Sensex has now fallen 1.8 percent this year wiping out the entire gains made in the previous month. Infosys (NSI:INFY.NS - News) is due to report October-December results on Friday, informally kicking off the results reporting season for blue chips.
India is due to post wholesale and consumer prices data next week, which will help determine whether the Reserve Bank of India will resume raising interest rates after tightening monetary policy by a total of 50 basis points over September and October.
"October-December earnings season would be about stock-specific stories. We have to watch out for management comments this season to establish whether ground realities have changed or not," said Dipen Shah, head of private client group research at Kotak Securities.
Expect market to consolidate more as optimism around reforms and rupee stability are getting matched by fiscal and inflationary problems, Shah added.
The Sensex fell 0.31 percent, or 64.03 points, to end at 20,787.30, marking its the lowest close since December 19.
The broader Nifty lost 0.32 percent, or 19.70 points, to end at 6,191.45, closing below the psychologically important 6,200 level.
In state-owned large cap banks, State Bank of India fell 1.8 percent while Bank of Baroda (NSI:BANKBARODA) ended 1.9 percent lower.
Larsen and Toubro (NSI:LT.NS - News) fell 0.2 percent, losing for a fourth consecutive session, with a total decline of 5.6 percent, on concerns that the company's new orders are slowing down, dealers say.
Power producers fell on media reports that the state government in Maharashtra is planning to cut power tariffs.
However, among stocks that gained, Lupin (NSI:LUPIN.NS - News) gained 0.6 percent, adding to Friday's 3 percent rise on hopes of regulatory approval for its request for permission to raise its foreign investor stake.
The Foreign Investment Promotion Board is due to meet this week and dealers cite expectations the regulator could consider Lupin's proposal.
(Editing by Gopakumar Warrier)