* BSE falls 0.07 pct; NSE ends down 0.08 pct
* Modi win engenders hopes for India's sluggish economy-poll
* Central bank to keep rates on hold-poll
By Indulal PM
MUMBAI, May 30 (Reuters) - Indian shares fell on Friday to mark their first weekly fall in four, as blue-chips such as State Bank of India declined after foreign investors sold shares for a fourth consecutive session, while caution was also seen ahead of GDP data and the central bank's policy review.
A Reuters poll predicts no clear improvement in Asia's third-largest economy, which is likely to have grown by 4.8 percent from a year earlier, while rates are expected to be kept on hold by the central bank on June 3.
Foreign institutional investors, who supported the sharp rally in Indian shares in May, continued selling on Thursday, their fifth session of sales in the last six. Overseas investors sold Indian shares worth 5.23 billion rupees ($88.6 million) on Thursday, provisional exchange data showed.
"Market has given a correction and its a healthy correction. This seems to be a buy-on-dips market. At every level, we have seen individual stocks outperforming," said Deven Choksey, managing director, KR Choksey Securities.
"We have RBI policy next week, and I don't think rates will be changed. We have more policy measures from the government to watch in the coming weeks, which will have an impact on markets."
The benchmark BSE index closed 0.07 percent lower at 24,217.34 points. It fell 1.9 percent in this week, but gained 8 percent in May.
The broader NSE index ended down 0.08 percent at 7,229.95 points. It lost 1.86 percent this week, while gaining 8 percent during the month.
Banking stocks led the declines with NSE's bank index falling 1.6 percent on profit-taking. The index gained 15.1 percent in May and investors were encashing positions ahead of the RBI policy meet, traders said.
State Bank of India fell 2.3 percent while ICICI Bank ended 1.3 percent lower.
Tata Motors Ltd closed down 2.2 percent after its earnings missed some analysts' estimates.
However, shares in defence equipment makers rallied on media reports of a potential increase in foreign direct investment limit in the sector from current 26 percent.
Bharat Electronics gained 1.9 percent, BEML surged 6.6 percent and Pipavav Defence and Offshore Engineering Co rose 5 percent.
Defensives such as pharma and healthcare stocks gained on value-buying. Hindustan Unilever gained 8.4 percent, Dr Reddy's Laboratories added 3.2 percent and Cipla Ltd ended 3.3 percent higher.
Shares in Mahindra & Mahindra gained 4.97 percent after its Jan-March earnings beat estimates.
Voltas Ltd surged 3.8 percent after Jan-March earnings came in sharply ahead of some analysts estimates, led by strong margin expansion in its cooling products business.
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FACTORS TO WATCH * Yen rally slackens off, all eyes on ECB meeting * Oil steady near $110 on supply risks, U.S. demand * Shares steady after hitting record high; all eyes on ECB * Foreign institutional investor flows * For closing rates of Indian ADRs
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Politics/General Asia Macro data (Additional reporting by Abhishek Vishnoi; Editing by Sunil Nair)