Sensex falls after Yellen comments, poor services data

MUMBAI (Reuters) - Indian shares fell on Thursday, heading for their biggest single-day percentage drop in more than two weeks after hawkish comments from U.S. Federal Reserve Chair Janet Yellen reinforced the case for an interest rate hike later this month.

Sentiment was also hurt after a business survey released on Thursday showed India's services industry barely expanded in November, growing at its weakest pace in five months.

Yellen said on Wednesday she was "looking forward" to a U.S. interest rate rise that will be seen as a testament to the U.S. economy's recovery from recession.

Fed policymakers are widely seen raising interest rates for the first time in almost a decade at their next meeting on Dec. 15-16, but they continue to parse data and trends carefully given the uneven nature of the U.S. recovery.

"Fundamentally nothing has changed but FIIs are selling frontline stocks which is where you're seeing pressure on the markets," said Deven Choksey, managing director at KR Choksey Securities.

Foreign investors, who account for little under 24 percent of Indian stock ownership, were net sellers in November, offloading 70.74 billion rupees ($1.06 billion) worth of shares.

The Nifty was 0.6 percent lower, while the benchmark BSE index was down 0.65 percent, heading for their biggest single-day percentage decline since Nov. 18.

Falls were led by stocks which have a higher percentage of foreign ownership, on worries that a hike in U.S. interest rates would lead to capital outflows.

ICICI Bank fell 1.3 percent, while Housing Development Finance Corp dropped 0.95 percent.

Shares of auto and IT services companies fell as torrential rains in the southern state of Tamil Nadu hit normal business activities.

Infosys fell 0.36 percent, while TCS was down 0.51 percent. Most Indian IT companies have 10-30 percent of their workforce based in Chennai, the capital of Tamil Nadu.

TVS Motor dropped 2.8 percent, heading for its third straight day of declines.

($1 = 66.6700 rupees)

(Reporting by Karen Rebelo in Mumbai; Editing by Subhranshu Sahu)