By Indulal PM
MUMBAI (Reuters) - The BSE Sensex and the Nifty fell for a third consecutive session on Thursday to their lowest in nearly two weeks as three state-run companies, including Oil and Natural Gas Corp, slumped after the government said it would pare its stakes in them.
Shares also tracked lower Asian markets after U.S. President Barack Obama vowed to fight Islamic State militants, while continued worries about earlier-than-expected U.S. interest rate hikes also weighed.
Overseas investors, who have been the backbone of the Indian stock market rally this year, sold local shares worth 99 million rupees ($1.63 million) on Wednesday, snapping seven straight sessions of buying, according to exchange and regulatory data.
Investors are expected to focus on August consumer price index data due on Friday, which is expected to have risen 7.80 percent from a year earlier compared with 7.96 percent in July, according to a Reuters poll of analysts.
"There is a general cautious sentiment in the market as stocks have ran up significantly. But overall optimism is still there. We advise clients to be in the market with good quality stocks," said Daljeet S Kohli, head of research at brokerage IndiaNivesh.
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The benchmark BSE Sensex closed 0.23 percent lower at 26,995.87. It has fallen 1.2 percent over the three sessions to Thursday after hitting a record high on Monday.
The broader Nifty closed 0.1 percent lower at 8,085.70.
The three state-run companies in which the government said it would sell stakes led losses. ONGC fell 3.6 percent, Coal India Ltd dropped 3.5 percent and NHPC Ltd declined 5.1 percent.
Sun Pharmaceutical Industries fell 4.3 percent on media reports of an inspection by the U.S. drug regulator on its Halol plant in Gujarat. A company spokesman declined to comment.
However, losses were limited as financial services stocks gained with IDFC Ltd closing 3.6 percent higher after the infrastructure lender launched an institutional share sale on Wednesday, which traders said got overwhelming support.
Infrastructure stocks gained after two days of falls, with Larsen & Toubro Ltd closing 0.6 percent higher.
(Reporting by Indulal PM; Editing by Subhranshu Sahu)