Indian equity shares fell for a second straight session on Wednesday, led by declines in ITC Ltd after the government proposed to amend anti-smoking laws, including banning the sale of loose cigarettes.

Sentiment was also hit as metal stocks slumped, tracking falls in commodities after the World Bank cut its global growth forecasts for 2015 and 2016.

However, the losses were limited as slower-than-expected inflation in December raised hopes for an early cut in interest rates to help the economy out of its longest phase of sub-par growth since the 1980s.

Global risk aversion amid concerns that the market is trading ahead of current earnings growth expectations is leading investors to shed some positions ahead of the central bank's policy review and the federal budget next month.

"Markets look priced in or expensive in the current global setup," said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.

Higher government expenditure is required in 2015 to revive the economy, he added.

The 30-share BSE index Sensex ended at 27,346.82, down 78.91 points or 0.29 per cent and the 50-share NSE index Nifty closed at 8,277.55, down 21.85 points or 0.26 per cent.

Among BSE sectoral indices, metal index plunged the most by 3.5 per cent, followed by healthcare 0.9 per cent, realty 0.73 per cent and FMCG 0.64 per cent, while IT index was up 1.08 per cent, TECk 0.8 per cent, auto and power 0.38 per cent each.

ITC fell 3.4 per cent after the Health Ministry had proposed on Tuesday to amend the anti-smoking law, which investors fear may lead to reduced volumes, especially if the sale of loose cigarettes is banned.

Sesa Sterlite slumped 8.1 per cent, while Hindalco Industries lost 6.3 per cent, after copper futures slumped to more than 5-1/2 year lows.

Global markets

The euro was pinned near nine-year lows on Wednesday as investors wagered the European Central Bank was just a week away from launching a new stimulus campaign, while concerns about the global economy kept Asian equities subdued.

There was no reprieve for commodities with oil near six-year lows while copper prices dropped further below $6,000 per tonne to their weakest level in more than five years.

European shares fell, mirroring a slump in copper and oil prices after the World Bank cut its global growth forecast for this year.

The FTSEurofirst 300 index of pan-European shares was down 1.3 per cent at 1,357.56 points at 0818 GMT, erasing most of its advance since the start of the week.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.3 per cent.

Australia's main index fell 0.9 per cent, with mining shares taking an added blow from the drop in copper.

Wall Street had ended Tuesday with minor losses, led by a drop in materials and energy shares. It was a choppy session with the S&P 500 swinging from a gain of 1.4 per cent to a fall of 1 per cent before steadying.

The Dow eased 0.15 per cent, while the S&P 500 dipped 0.26 per cent and the Nasdaq 0.07 per cent.

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