Indian shares fell on Friday as a drop in financials and information technology stocks overshadowed gains in auto stocks, while a global rally triggered by hopes of U.S. interest rate cuts cooled down.

The blue-chip NSE Nifty 50 shed 0.18% to 22,366.05 points, while the S&P BSE Sensex dropped 0.19% to 73,523.22, as of 9:48 a.m. IST.

Seven of the 13 major sectors logged losses. The two heaviest sectors - financials and IT index dropped about 0.5% each.

Analysts attributed the drop in high weightage financials to high foreign investors' ownership in the sector.

Foreign portfolio investors (FPIs) selling in Indian shares is at a 16-month high in May.

The drop in U.S. rate-sensitive IT stocks comes after data showed a fall in weekly jobless claims on Thursday, indicating a tight labour market while a rise in U.S. import prices signalled persistent price pressures.

The data dampened hopes of early rate cuts on cooler-than-expected inflation data for April, which spurred a 1.66% rise in the sector in the previous session.

"The pressure on the markets is mainly due to sustained foreign selling," said Pramod Gubbi, co-founder of Marcellus Investment Managers.

"Global money is going to other emerging markets like China, which are trading at a significant discount to India. Besides investors are still re-calibrating the timing of U.S. rate cuts on mixed data on the U.S. economy," Gubbi added.

Auto stocks jumped 2% to an all-time high.

Mahindra & Mahindra surged 7% to a record high. The auto maker's stock had risen 3% in the previous session, on

beating the March quarter profit view.

While the benchmarks were subdued, the broader, more-domestically focussed small- and mid-caps were up 0.8% and 0.4%, respectively.

Endurance Tech, Triveni Turbine, Info Edge, Dixon Technologies and Kaynes Technologies surged between 5.5% and 12%, on the back of strong March quarter results, and led the gains in broader markets.

 

(Reporting by Dimpal Gulwani and Bharath Rajeswaran in Bengaluru; Editing by Nivedita Bhattacharjee)