Sensex heads towards third day of losses

MUMBAI (Reuters) - The BSE Sensex and Nifty extended losses for a third consecutive session as investors remained cautious ahead of the conclusion of the U.S. Federal Reserve's meeting later in the day and the expiry of monthly derivatives contracts back home this week.

Although the U.S. Fed is likely to keep interest rates unchanged this week, investors are looking forward for clues as to the timing of a widely expected rate hike.

Indian shares will react to the news on Thursday, the same day when monthly derivatives contracts expire.

"Getting some clarity from the Fed on rates could give the markets some bounce," G Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm said.

The Sensex was down 0.89 percent after falling below the psychologically important 27,000 level.

The Nifty was trading 0.8 percent lower after crossing the 8,200 mark.

Axis Bank fell as much as 7.6 percent despite posting July-September profit in line with expectations on Tuesday, as investors reacted to a sale of loans to asset reconstruction companies at steep discounts.

Among other banking stocks ICICI Bank fell 3.3 percent while State Bank of India declined 2.33 percent.

Lupin's disappointing quarterly results on Tuesday continued to weigh on pharmaceutical stocks. Lupin and Dr Reddy's Laboratories fell more than 2 percent each.

Beaten down telecommunications stocks recovered on Wednesday, with Bharti Airtel gaining 1.3 percent while Idea rose 0.04 percent.

Investors are also keeping an eye on InterGlobe Aviation Ltd's $465 million initial public offering that was fully subscribed 1 p.m. on the second day of its bookbuilding issue.

India's biggest listing in nearly three years is being closely watched by domestic and foreign investors as an indicator of demand for Indian equities.

(Reporting by Karen Rebelo in Mumbai; Editing by Anand Basu)