* BSE Sensex drops for fifth straight session
* Foreign funds net sellers of Indian shares Mon-Wed
* Sentiment cautious ahead of cbank policy next week (Updates to close)
MUMBAI, April 29 - Indian shares declined for the third month out of the four in 2011, and ended lower for the fifth straight session on Friday, as investors exercised caution on expectations the central bank may adopt a hawkish approach at its policy on Tuesday.
They also posted their worst weekly loss since late February, after foreign institutional investors (FIIs) sold Indian equities for the first three sessions this week.
Financials were the top losers as the market expected the RBI to raise key short-term rates by at least 25 basis points, which would mark the ninth increase since mid-March last year, to curtail persistently high inflation. For a Take a Look [ID:nL3E7FT0L9]
"The RBI may hike rates by 25 basis points, but a very harsh action is not likely," said Sandeep Sabharwal, CEO of portfolio management services at brokerage Prabhudas Lilladher.
"A bigger move will not be of much help as inflation is largely driven by commodity prices.'
The banking sector index slipped 1.7 percent.
The 30-share BSE index slipped 0.81 percent, or 156.06 points, at 19,135.96 points, with 21 components losing ground.
It declined 2.4 percent for the week, taking losses for the month to 1.6 percent.
The 50-share NSE index dropped 0.6 percent to 5,749.50.
More than two shares declined for every share that advanced in the broader market on a volume of 711 million shares on NSE, higher than their 30-day average daily volume of 645 million shares.
"I don't think there is a directional sell off by FIIs. We are just seeing some correction after the steep run up in March," Sabharwal said. "People are jittery before the RBI policy."
Foreign funds, who had been net sellers in January and February, have bought a total of $3.2 billion over the past eight weeks.
"With Fed's easy policy stance, inflows are likely to be good," he added.
Leading lenders State Bank of India , ICICI Bank and HDFC Bank fell between 0.3 percent and 1.8 percent.
Mortgage lender Housing Development Finance Corp shed 1.5 percent.
Energy giant Reliance Industries rose 1.2 percent after falling 6.6 percent over four previous sessions.
State-run explorer Oil & Natural Gas Corp slipped 2.8 percent, after gaining nearly 5 percent over the previous three sessions.
World equities as measured by the MSCI index edged 0.1 percent higher by 1032 GMT, while its emerging markets index slipped 0.1 percent.
STOCKS THAT MOVED
* Crompton Greaves tumbled 10.1 percent to 252.20 rupees after the power equipment maker reported late on Thursday a 6 percent decline in March-quarter profit. [ID:nBMB012762]
Credit Suisse said in a note a sharp fall in margins was a concern.
* Uco Bank dived 9 percent to 104.45 rupees after the state-run reported a 40.5 percent decline in its quarterly net profit.[ID:nBMB012774]
* Oriental Bank of Commerce declined nearly 6 percent to 345.55 rupees after the state-run lender reported a lower-than-expected 5.4 percent increase in its March quarter net profit.[ID:nBMB012771]
* Steel Authority of India closed 1.6 percent lower at 159.30 rupees, ahead of its March-quarter earnings announcement.
MAIN TOP THREE BY VOLUME ON NSE
* Ambuja Cements on 63.7 million shares
* Unitech on nearly 30 million shares
* Alok Industries on 29.5 million shares
FACTORS TO WATCH * For technical analysis see: www.reuterstechnicals.com * Indian rupee report * Indian bonds report * Dollar stuck near 3-yr lows; month-end flows weigh * Brent falls to $124.70 on fears over slower U.S. growth * Dollar still friendless, stocks pause for breath * U.S. stock index futures slip; earnings, data eyed * For closing rates of Indian ADRs (Reporting by Ami Shah; Editing by Aradhana Aravindan)
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