Sensex lower; blue chips fall

MUMBAI (Reuters) - The BSE Sensex and Nifty pared early gains to fall for the sixth session in seven on Thursday, dragged down by blue-chips as investors chose to pause despite clarifications from the finance ministry over the government's taxation policies.

Senior finance ministry officials sought to calm a tax row on Wednesday, promising foreign investors a favourable environment, but stopped short of scrapping unpopular plans to claim retrospective payments.

Foreign institutional investors sold Indian shares worth 9.1 billion rupees ($144.08 million) on Wednesday, provisional exchange data showed.

Sentiment remained cautious as corporate earnings continued to miss estimates, while a forecast for poor rains ahead of the June-to-September monsoon season raised concerns of drought.

"We expect some more downfall. Whatever earnings that came out are not that great, and valuations are way high. We are not in a hurry to buy. And we advise clients to wait for some more time," said Daljeet S Kohli, head of research at IndiaNivesh.

The Sensex eased 0.56 percent while the broader Nifty fell 0.4 percent.

Blue-chip stocks led the decline. Larsen and Toubro fell 1.3 percent, ICICI Bank traded 0.7 percent lower while State Bank of India lost 1.9 percent.

Wipro Ltd fell 1.5 percent, adding to its 5.8 percent fall in the previous session after its earnings missed some analysts' expectations.

However, shares in steel companies gained, with Tata Steel up as much as 5 percent after Bank of America-Merrill Lynch reinstated coverage with a bullish stand.

($1 = 63.1600 rupees)

(Reporting by Indulal PM; Editing by Sunil Nair)