The BSE Sensex was down 0.9 percent on Friday, heading for its first weekly fall in eight weeks, as investors took profits on concerns about rising global oil prices and the country's widening fiscal deficit.
Lenders such as ICICI Bank (ICBK.NS) and HDFC Bank (HDBK.NS) were among the big losers as market expectations for a rate cut in March was tempered by the rally in world oil prices, which could make it difficult for the central bank to ease policy.
Leading mortgage lender Housing Development Finance Corp (HDFC.NS) fell as much as 6.2 percent after sources said Citigroup Inc (C.N) sold its entire stake in the company for about $1.9 billion.
A widening fiscal deficit and the worry that the rising crude oil prices may push up inflation are making investors cautious, said Arun Kejriwal, a strategist at research firm KRIS.
India imports about 80 percent of the oil it consumes and the rise in prices could worsen a widening trade deficit.
Brent crude climbed above $124, on track for a fifth straight weekly gain, as worries over Iranian supply and upbeat U.S. economic data offset concerns that high oil prices could snuff out demand.
At 10:53 a.m. (0523 GMT), the main 30-share BSE index was down 0.89 percent, or 161.56 points, at 17,916.94. 17 of its components were in the red.
The benchmark, which has gained almost 17 percent since the end of December, is down about 2 percent so far this week.
ICICI Bank was down more than 2 percent and HDFC Bank shed 1.1 percent.
State Bank of India, the country's biggest lender, shed 1.2 percent. The stock was also weighed down after the state-run bank priced a planned share sale to the government at a discount to Thursday's close.
Mangalore Chemicals (MNGL.NS) jumped as much as 16 percent after newspaper reports said UB Group Chairman Vijay Mallya had been approached by potential buyers of UB's 30.4 percent stake in the company.
The 50-share NSE index was down 0.86 percent at 5,436.05. In the broader market, there were about 1.8 losers for every gainer, with 464.5 million shares changing hands.
Asian shares crept higher on Friday as solid U.S. data improved sentiment, but gains may be limited by concerns that rising oil prices could deal a further blow to the fragile euro zone economy and moves to take profits after recent rallies.
At 0527 GMT, the MSCI's measure of Asian markets other than Japan was up 0.29 percent, while Japan's Nikkei was up 0.36 percent. South Korea's Kospi rose 0.39 percent.
STOCKS ON THE MOVE
* Shasun Pharmaceuticals (SHAS.NS) rose as much as 8.4 percent after the company said its board would meet on February 27 to consider a preferential allotment of shares to private equity investors.
* DB Realty (DBRL.NS), part of India's DB Group, fell 4 percent, extending losses to a third day. Abu Dhabi-based Etisalat ETEL.AD said this week it is shutting down its Indian mobile joint venture with DB Group and has launched legal proceedings against its Indian partners.
DB Realty has said the shutdown of the mobile venture would have no bearing on its financials because this was an investment by its founders in their individual capacity.
MAIN TOP THREE BY VOLUME
* HDFC on 153.2 million shares
* Lanco Infratech (LAIN.NS) on 35.7 million shares
* Sterlite Industries (STRL.NS) on 11.6 million shares