Sensex, Nifty fall most in 1-1/2 months ahead of Fed outcome

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex and Nifty fell over 1 percent on Tuesday, posting their biggest single-day decline in 1-1/2 months as blue-chips slipped on caution ahead of the U.S. federal Reserve's two-day meeting while foreign portfolio sales also weighed on sentiment

The 50-share Nifty closed below key 8,000 level alongside global stocks that slipped to one-month lows as investors await clues on whether the U.S. central bank could raise interest rates sooner than previously expected.

Overseas investors sold index futures worth of 13.94 billion rupees ($228.2 million) and cash shares worth of 746 million rupees on Monday, exchange data showed.

Indian indexes touched record highs last week, driven by foreign investors who have pumped in 14.18 billion rupees in shares in 2014 so far, on hopes reforms by Narendra Modi-led government will revive growth in Asia's third largest economy.

"Looking at global markets, U.S. Fed has been hinting at tightening of interest rates after following loose monetary policies for past six years. This could lead to sell off in equity in emerging markets and impact India also," said Atul Kumar, head of equity funds at Quantum AMC.

The broader Nifty lost 1.36 percent, or 109.10 points, to end at 7,932.90. Earlier, it hit an intraday low of 7,925.15, the lowest since Aug. 27.

The benchmark BSE Sensex fell 1.21 percent, or 324.05 points, to end at 26,492.51.

Both the indexes saw their biggest single-day fall since Aug. 1.

Blue-chips led the declines. Reliance Industries Ltd fell 2.3 percent, while Axis Bank ended lower 3 percent.

Oil and Natural Gas Corp fell 2.9 percent while Tata Motors lost 2.5 percent.

Among other major losers, State Bank of India fell 2.3 percent and Larsen & Toubro ended down 2.9 percent.

Yes Bank Ltd fell 4 percent, extending Monday's 5.2 percent slump after MSCI excluded the lender from its standard and mid-cap indexes.

However, Colgate-Palmolive (India) rose 2.8 percent after Credit Suisse upgraded the stock to "outperform" from "underperform," saying competitive risk from Procter & Gamble Hygiene and Health Care Ltd has abated.

(Editing by Anand Basu)