Indian shares slip, tracking financials as Adani stocks extend slide

BENGALURU (Reuters) -Indian shares fell in a volatile session on Monday, mirroring the financials ahead of the Union budget as Adani Group extended a decline after a short-seller attack on group companies triggered a sell-off over the previous two sessions.

The Nifty 50 index was down 0.98% at 17,432.45 as of 1:58 p.m. IST, while the S&P BSE Sensex fell 0.91% to 58,792.16. Both indexes had gained 0.6% earlier in the session.

The move in the benchmarks was in step with the intraday trajectory of high-weightage financials, which is down 1.7% as of 1:58 p.m. IST. Financials had dragged the index over the previous two sessions.

Indian equities had tumbled to a three-month low on Friday, dragged by a short-seller attack on Adani group companies, which triggered a selloff in banks.

The group is facing a critical session today with the secondary share sale of the flagship Adani Enterprises seeing only 2% subscription as of 2 p.m. IST on Monday.

"The markets will remain very volatile ahead of the budget," Aishvarya Dadheech, director and fund manager at Ambit Asset Management said. Analysts also cited fears of a drawdown in financials on the back of a scathing report by Hindenburg Research that raised concerns about the books of Adani companies.

Adani Enterprises rose as much as 10% before erasing gains to fall nearly 3% after Adani Ports reversed a climb. The other group stocks corrected further for the third consecutive session.

Thirteen of the Nifty 50 constituents advanced while 37 declined. Among individual stocks, Bajaj Finance rose nearly 5% to a four-month high of 6,040 rupees after its third-quarter earnings beat estimates, while Sun Pharma hovered near an eight-year high ahead of third-quarter results.

Foreign institutional investors sold 83.72 billion rupees ($1.03 billion) worth of shares over the last two sessions since Hindenburg's report.

Investors will also shift focus to India's Union budget on Feb. 1, with the government's fiscal consolidation path and borrowing calendar for fiscal 2024 as triggers.

Besides the Union budget, analysts also said rate decisions by global central banks and January automobile sales data would determine the mood in the market.

The U.S. Federal Reserve, European Central Bank and the Bank of England are scheduled to announce their rate decisions, later this week.

($1 = 81.6450 Indian rupees)

(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Dhanya Ann Thoppil)