Nifty falls over 1 percent, breaks key 8,000 level

MUMBAI (Reuters) - Indian shares fell more than 1 percent on Thursday, with the broader Nifty breaking the psychologically important 8,000 level intraday for the first time in more than a month on worries over foreign investor sales and a likely weak monsoon.

Stocks gave up gains made in the previous session after index compiler MSCI Inc delayed the inclusion of Chinese domestic shares in its emerging markets index, keeping India and other markets' weightage intact in the index.

Investors are concerned that a weak monsoon may delay further interest rate cuts by the central bank and even make the Narendra Modi-led government take populist measures or at least delay key reforms, including the one on land acquisition that is before parliament.

Overseas investors have sold nearly $112 million worth of cash shares in June so far, adding to the $902.38 million worth shares sold in the previous month, depository and exchange data showed, amid worries over slow reforms and retrospective taxes.

"Falls are surprising if one looks at the strong internals of Indian economy. Foreign sales should abate as reforms pick up," said G. Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm.

The Nifty fell as much as 1.5 percent, breaking the key 8,000 level during the day for the first time since May 7.

The BSE Sensex lost up to 1.4 percent, heading towards its biggest daily fall since June 2.

Technical analysts say a close below the 8,000 level may increase probability of the NSE index falling to the 7,800 level.

Also, UBS on Wednesday reduced its target for the NSE index to 8,400 from 9,200 citing slow pace of growth recovery and monsoon forecasts raising concerns over inflation.

Blue chip stocks led the declines. Reliance Industries fell 3.1 percent while ICICI Bank lost 1.7 percent.

Housing Development Finance Corp lost 1.8 percent and Tata Motors fell 3.5 percent.

Only six out of 50 stocks in the Nifty were gainers.

($1 = 63.9200 rupees)

(Reporting by Abhishek Vishnoi; Editing by Biju Dwarakanath)