Sensex falls amid foreign portfolio sales; lenders hit

MUMBAI (Reuters) - The BSE Sensex fell on Tuesday as private sector lenders that are heavily owned by foreign investors, such as ICICI Bank , declined on continued foreign portfolio sales and worries central bank may not cut rates further this year.

The RBI's projection of inflation rising to 6 percent in January 2016 and fears of drought are setting up the possibility of no more rate cuts this year.

Falls also tracked lower Asian stocks as financial markets braced for the possibility of Greece defaulting on its debt, while a two-day policy meeting of the U.S. Federal Reserve's monetary committee starting later in the day also prompted caution.

Overseas investors have sold nearly $215.11 million worth of cash shares in June so far, adding to the $900 million worth shares sold in the previous month, depositary and exchange data showed, amid worries over slow reforms, monsoon and retrospective taxes.

"We expect rate cuts but in January and April," said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.

Developments in Greece and U.S. Federal Reserve's commentary would also be important for the near term, he added.

The BSE Sensex fell 0.7 percent, while the Nifty lost 0.63 percent.

Investors across the United States have become negative at the margin on India and there can be more declines if key reforms on taxes, land acquisition and bank capitalisation don't progress as per expectations, investment bank Macquarie said in a report on Monday.

Bank shares led the declines. The Bank Nifty fell 0.7 percent.

ICICI Bank lost 1 percent while Housing Development Finance Corporation fell 2.4 percent.

Axis Bank lost 1.4 percent and HDFC Bank was lower by 0.5 percent.

($1 = 64.2000 rupees)

(Reporting by Abhishek Vishnoi; Editing by Gopakumar Warrier)