Sensex down led by banks, rupee near record low

MUMBAI (Reuters) - India's stock markets fell on Wednesday, following other Asian markets amid signs that Iran will not join in a deal with top oil producers to freeze output at January levels, while sentiment was also hit after the rupee approached a record low.

Concerns about oil prices and continued doubts about China's economy have pressured global markets. The rupee fell to as low as 68.67 to the dollar, not far from a record low of 68.85 hit in August 2013 when India was struggling with its worst financial turmoil in more than two decades.

Banking shares continued to be hit due to worries they will continue to struggle with bad loans. Ratings agency Standard & Poor's said on Tuesday rising capital needs put Indian public sector banks at risk of downgrades.

Overseas investors sold a net $164.83 million of Indian shares on February 15, taking this year's outflow to $2.3 billion.

"Markets are dependent on foreign flows and FIIs (foreign institutional investors) have been pulling out all through, not because we are looking bad, its more of an emerging market issue," said independent market analyst Ambareesh Baliga.

The broader NSE Nifty and the benchmark BSE Sensex both fell 0.4 percent.

Markets now await minutes of the Federal Reserve's last meeting due later in the day.

Among laggards, public-sector banks such as Bank of India and Punjab National Bank fell 2 to 3 percent.

Allahabad Bank fell 1.4 percent after Indian rating agency CRISIL downgraded state-run lender's tier-I and tier-II bonds from various levels to "AA".

But Just Dial gained as much as 18 percent after saying late on Tuesday it would start buyback of 1.6 million shares from Feb. 25 to March 10.

Bharat Petroleum Corp rose 3.4 percent on media reports it had gotten clearance from Environment Ministry for a 3.37 billion rupees ($49.14 million) project at a refinery in Kochi, Kerala.

($1 = 68.5850 Indian rupees)

(Reporting by Aastha Agnihotri; Editing by Gopakumar Warrier)