Sensex retreats from near 1-1/2 month high

MUMBAI (Reuters) - India's stock markets retreated from their highest level in nearly 1-1/2 months to snap a six-day winning streak on Thursday on profit-taking in blue chips while a lack of announcements on restructuring power distributors' burgeoning loans also weighed.

State-run electricity distributors, who collectively owe $66 billion, are running out of cash and struggling to repay loans, squeezing banks' ability to spur credit growth and undermining Prime Minister Modi's campaign to lure energy-hungry manufacturers to expand production.

Falls also tracked lower regional markets ex-China with Japanese equities hitting the skids on weak data.

"There is absence of buying at higher levels. The cabinet did not consider the loan restructuring proposal but they should going forward," said Deven Choksey, managing director at K R Choksey Securities.

The 30-share BSE Sensex was trading 0.87 percent lower while the 50-share Nifty was down 0.74 percent after earlier marking their highest level since Aug. 21.

The upcoming earnings reporting season with Infosys due to post July-September results on Oct. 12, and macro data including inflation and industrial output next week would be key domestic data points to watch in the near term.

Among blue chip stocks, Reliance Industries fell 1.8 percent while ICICI Bank was down 1.3 percent.

Index heavyweight and India's biggest cigarette maker ITC lost on media reports of a likely ban on loose cigarettes in Uttar Pradesh.

Among gainers, Muthoot Finance rose 3 percent extending Wednesday's gains after Motilal Oswal started coverage on the stock with a "buy" rating and a target of 234 rupees per share.

(Reporting by Abhishek Vishnoi in Mumbai; Editing by Sunil Nair)