Indian shares hit 5-mth low as banks drag; await inflation data

People walk past a new brand identity for Nifty Indices inside the National Stock Exchange building in Mumbai

By Nishit Navin

BENGALURU (Reuters) -Indian shares fell to a five-month low on Monday, dragged by a selloff in financial stocks, as the Silicon Valley Bank (SVB) collapse weakened investor sentiment.

The Nifty 50 index closed down 1.5% to 17,154.30, while the S&P BSE Sensex dropped 1.52% to 58,237.85.

Meanwhile, U.S. authorities on Sunday announced plans to limit the fallout from the SVB collapse, easing fears of contagion.

"The market has reverted to panic mode," said Anand James, chief market strategist at Geojit Financial Services.

"It is more of a fund liquidation rather than a bank-related issue," James said, adding that banks, in general, are also finding themselves on "shaky ground" with more central banks set to come up with rate decisions.

Market bets have changed dramatically, with participants now betting an 80.4% chance of a 25-basis point (bps) rate hike by the U.S. Federal Reserve in March instead of a 50-bps increase, with the rest expecting a status quo. [.N]

Indian analysts don't expect a ripple effect on the domestic financial system from the SVB crisis to last long.

Bank stocks dropped 2.3%, while public sector banks fell 2.9%. Auto companies lost 2.2%.

IndusInd Bank Ltd was the top loser in the Nifty as well among banking stocks, sliding 7.4%.

The Reserve Bank of India (RBI) approved a less-than-proposed period as the tenure of re-appointment of the private lender's chief executive officer (CEO), said analysts.

On the flip side, Indian IT services provider Tech Mahindra jumped nearly 7% after it named Infosys veteran Mohit Joshi as the new CEO.

Meanwhile, Indian investors await retail inflation data, which likely eased to 6.35% in February, though still above the RBI's upper threshold for a second straight month, a Reuters poll of 43 economists showed.

(Reporting by Nallur Sethuraman and Nishit Navin in Bengaluru; Editing by Janane Venkatraman and Dhanya Ann Thoppil)