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Indian shares fall on rate fears, foreign investor selloff

Bombay Stock Exchange building is pictured next to police van in Mumbai

BENGALURU (Reuters) -Indian shares closed lower on Monday, dragged by tech stocks after a strong U.S. jobs report renewed fears of the Federal Reserve sustaining aggressive rate hikes for longer, while foreign investors continued to sell.

The Nifty 50 index closed 0.50% lower at 17,764.60, while the S&P BSE Sensex fell 0.55% to 60,506.90.

Thirty-four of the Nifty 50 constituents declined, with Divi's Laboratories extending losses after reporting lesser-than-expected consolidated net profit in the third quarter, on Friday.

Metals fell 2.20%, and was the top sectoral loser, while high weightage financials and information technology stocks also declined.

Wall Street equities fell on Friday after nonfarm payrolls rose by 517,000 jobs in January, way above a Reuters estimate of 185,000.

The strong report heightened fears that the Fed might continue its rate hike trajectory, with interest rate futures now pointing to chances of the central bank delivering at least two more rate hikes.

The IT stocks were down 0.61%, trimming some of the intraday losses amid rate-hike concerns in the United States that could push the economy into a recession. The index was down 1.34% earlier in the session.

IT companies in the country draw the bulk of their revenue from clients in the United States. A potential slowdown in the world's largest economy could hobble their growth prospects.

However, there was limited downside as technology stocks were trading at attractive valuations, analysts said.

Meanwhile, the uncertainty in Adani stocks had created panic in Indian markets. Ratings agency Moody's warned that the tumble in Adani group stocks could hit the conglomerate's ability to raise capital.

Barring Adani Ports, which rose over 9% on Monday, most other group stocks extended losses.

Moreover, the "relentless selling by foreign investors in Indian stocks is a serious cause for concern," said Siddhartha Khemka, head of research (retail) at Motilal Oswal Financial Services.

Foreign selling in Indian equities hit a seven-month high of $3.51 billion in January, according to official data.

($1 = 82.2060 Indian rupees)

(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Nivedita Bhattacharjee and Dhanya Ann Thoppil)