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Indian shares fell onMonday, weighed downby financials, while some small- and mid-cap stocks slipped aftera report said the markets regulator was investigating allegations of "front-running" at Quant Mutual Fund.
The NSE Nifty 50 .NSEI was down 0.14%at 23,467.75 as of 10:48 a.m. IST, while the S&P BSE Sensex .BSESN shed 0.2% to 77,069.26.
"It's a reality that there is valuation comfort only in select pockets, so the benchmarks could continue to trade near current levels," said Saurabh Jain, assistant vice president of research of retail equities at SMC Global.
The earnings season and the national budget announcement next month will influence the trajectoryof the markets, Jain added.
Financials .NIFTYFIN and private banks .NIFPVTBNK, which outperformed other sectors last week, shed 0.25%and 0.60%, respectively, weighing on the benchmarks.
The broader, more domestically focussed small- .NIFSMCP100 and mid-caps .NIFMDCP100 each traded 0.1% lower.
Local news website Money Control reported that the markets regulator was probing Quant Mutual Fund over allegations of front running - or dealing on price-sensitive information before its general release.
Quant, one of the fastest-growing fund houses in the country and an active investor in small- and mid-cap stocks, said it is responding to the regulator's queries.
"The Securities and Exchange Board of India's investigation on Quant Mutual Fund is a slight sentiment-negativefor the markets," said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
Aurobindo Pharma ARBN.NS, Steel Authority of India SAIL.NS and Aegis Logistics AEGS.NS, which are among Quant's topholdings in broader markets in terms of value, shed 1%-4.5%.
RBL Bank RATB.NS, among Quant's topsmall-cap holdings in terms of value, fell 3.7% and was the top percentage loser in the private bank index.
Century Enka CNTE.NS, HFCL HFCL.NS and Arvind ARVN.NS lost 2%-4%. The stocks are Quant's topholdings in terms of ownership of outstanding shares.
Meanwhile,drugmaker Cipla CIPL.NS dropped 2.3% after receiving observationsfrom the U.S. drug regulator for one of its facilities.