* BSE index falls 1.31 pct; biggest fall since Feb 3
* NSE index down 1.28 pct; biggest fall since Feb 13
* Markets to take a breather ahead of RBI policy review-analyst
By Indulal PM
MUMBAI, May 29 (Reuters) - India's NSE index posted its biggest daily decline in nearly four months and its third fall over the past four sessions on Thursday as Infosys slumped after its president resigned, while profit-taking continued to hit shares after record highs earlier this month.
Sentiment was further dampened as foreign institutional investors sold shares, albeit at modest amounts, after strong buying earlier this year. Overseas funds sold shares worth a net $48.75 million on Wednesday, their fourth session of selling in five, provisional exchange data showed.
Losses accelerated in the afternoon as the monthly derivative contracts expired at the end of the session.
Analysts said markets would take a breather ahead of the Reserve Bank of India's policy review next week and ahead of policy announcements from Narendra Modi's government that will need to fulfill high expectations.
"We find this as a healthy correction. The election event is over and we have a stable government in place. I think, fresh position building will happen from next week as we have RBI policy and the parliament proceedings will start," said Suresh Parmar, head, institutional equities at KJMC Capital Markets.
"The undercurrent is still positive and we advise clients to get into good quality stocks at declines."
The benchmark BSE index fell 1.31 percent to 24,234.15 points, its biggest fall since Feb. 3.
The broader NSE index closed 1.28 percent lower at 7,235.65 points, falling the most since Feb. 13.
Infosys Ltd fell as much as 7.84 percent, its biggest single-day fall since March after its president and board member B.G. Srinivas, seen by some investors as a candidate to take over as CEO, resigned.
Srinivas became the latest senior manager to leave India's second-largest software services exporter.
Companies whose earnings disappointed investors also tumbled during a heavy week of results. Hero MotoCorp fell 0.14 percent after the motorcycle maker's January-March profit adjusted for other income lagged some analyst estimates.
Shares in Oil and Natural Gas Corp. fell 2.63 percent while Cipla Ltd closed 1.95 percent lower, ahead of its earnings announcement later during the day.
Shares in Unitech Ltd fell as much as 4.8 percent after posting a wider-than-expected 515.5-million-rupee ($8.76 million) loss in the January-March quarter.
Shares in Coal India Ltd fell 1.8 percent after its March quarter earnings fell short of expectation.
Among the gainers, Hindaco Industries Ltd was up 1.43 percent despite a 48 percent fall in net profit as its operational numbers beat estimates, traders said.
Shares in Dr Reddy's Laboratories Ltd rose 1.38 percent on value-buying.
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Editing by Sunil Nair