The benchmark BSE index fell for the third straight session on Thursday, closing at its lowest level in nearly 6-1/2 months, on continued selling by foreign investors due to worries over retrospective taxes and a delay in passage of Land Acquisition Bill.

Falls also tracked Asian stocks, led by losses in Wall Street, while a rise in euro zone debt yields amid a global bond rout kept the euro near a two-month peak versus the dollar.

The 30-share BSE index Sensex fell 118.26 points or 0.44 per cent to 26,599.11 and the 50-share NSE index Nifty ended down by 39.7 points or 0.49 per cent at 8,057.30.

Among BSE sectoral indices, banking index fell the most by 2.33 per cent, followed by realty 2.2 per cent, infrastructure 2.18 per cent and consumer durables 2.01 per cent. On the other hand, IT index was up 1.63 per cent, followed by TECk 1.31 per cent and FMCG 0.14 per cent.

Top five Sensex gainers were TCS 3.27%, Bajaj Auto 2.51%, Coal India 2.21%, ITC 1.54% and Hero MotoCorp 1.21%, while the major losers were Axis Bank 2.95%, ONGC 2.94%, Maruti 2.52%, Hindalco 2.47% and ICICI Bank 2.44%.

Foreign institutional investors sold shares worth Rs 1,699 crore ($265.80 million) on Wednesday, adding to their $360.88 million selloff in the previous session, exchange and regulatory data showed. Overseas investors have been net sellers this month with a net outflow of $693.8 million, the data showed.

"There is clarity on tax-related issues. Direction is missing in the government's policy decisions. We expect weakness to persist in the near-term," said Suresh Parmar, head, institutional equities at KJMC Capital Markets.

The share market has lost nearly 12 per cent since hitting a record high in March. The declines came amid sales of $2 billion of shares by investors in the last 14 sessions, excluding the amount raised from Daiichi Sankyo's stake sale in Sun Pharmaceuticals, according to depository data.

Early trade

The Nifty opened marginally in the red and the Sensex opened flat in the absence of directional cues. The Nifty opened 20 points down at 8,077, while the Sensex opened four points up 26,721.

A report by SMC Investments and Advsiors said: "US markets declined as Fed hinted at bubbles in the financial market due to ultra low interest rate environment. Asian markets also lost due to overall global sentiment. Labour productivity in the US showed another notable decrease in the first quarter of 2015, according to a report released by the Labour Department. The report said labour productivity fell by 1.9 per cent in the first quarter following a 2.1 per cent decrease in the fourth quarter. The continued drop in productivity matched economist estimates. A modest decrease in output contributed to the continued drop in productivity, which is a measure of output per hour. The Labour Department said output edged down by 0.2 per cent in the first quarter after climbing by 2.6 per cent in the fourth quarter.The pace of growth in hours worked slowed to 1.7 per cent in the first quarter from 4.9 per cent in the fourth quarter but still contributed to the drop in productivity."

European markets

European shares fell to their lowest in more than two months on Thursday, mirroring losses in Wall Street and Asia, with a stronger euro following a global bond rout and concerns about the outcome of the British election hitting the trading sentiment.

At 0711 GMT, the pan-European FTSEurofirst 300 index was down 1 per cent at 1,532.24 points after falling to its lowest since late February.

Asian stocks fell on Thursday, taking the lead from losses on Wall Street, while a rise in euro zone debt yields amid a global bond rout kept the euro hovering at a two-month peak versus the dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.1 percent as China, Hong Kong, Australian, South Korean and Malaysian shares retreated.

US stocks ended weaker on Wednesday after US Federal Reserve Chair Janet Yellen warned of high valuations, adding to anxiety about future interest rates and a global bond rout.

The S&P 500 ended at a low not seen since early April after Yellen said high equity valuations could pose dangers, although she also said she does not see any bubbles forming.

Cutting losses of more than 1 per cent in afternoon trade, the Dow Jones industrial average fell 86.22 points or 0.48 per cent to 17,841.98, the S&P 500 lost 9.31 points or 0.45 per cent to 2,080.15 and the Nasdaq Composite dropped 19.68 points or 0.4 per cent to 4,919.64.

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