Sensex stares at six straight day of losses as tax reform hopes fade

MUMBAI (Reuters) - Indian shares headed towards a sixth session of losses on Wednesday, staying near three-month lows hit on Tuesday, as hopes dwindled that a crucial tax reform would be cleared in the ongoing winter session of parliament.

India's main opposition Congress Party disrupted a parliament session and accused the government of pursuing a "vendetta" against the Gandhi family on Tuesday, in a blow to hopes of passing the proposed goods and services tax (GST) Bill.

Prime Minister Narendra Modi's government plans to implement the nationwide tax that will replace a long list of state levies from April 2016.

Shares in logistics firm Gati , which stand to gain most from a speedy rollout of the tax, fell over 7 percent. "Initially, people didn't even expect GST to go through, the expectation was one of some sort of consensus arriving," said Arun Gopalan, vice president of research at brokerage firm Systematix Shares and Stocks.

 

"But now with a lot of other unrelated negatives coming into the political scenario, even that sort of a consensus the market would find difficult to envisage."

India's stock market, where foreign investors hold slightly under a quarter of shares, is expected to see capital outflows accelerate ahead of the U.S. Federal Reserve's Dec. 15-16 meeting, when it is widely expected to lift rates.

The Nifty was trading 0.45 percent lower at 12:34 p.m. after falling as much as 0.63 percent earlier.

The index dipped below the crucial support level of 7,700 on Tuesday, and fell further on Wednesday to hit its lowest since Sept. 8.

The Sensex was trading 0.44 percent lower after falling as much as 0.57 percent earlier.

All sectors were down, barring select consumer and IT stocks that gained on short-covering.

Profit-booking was seen in stocks such as Sun Pharma , down 2.2 percent, and Reliance Industries which fell 0.9 percent.

Meanwhile, shares of Bharat Heavy Electricals (BHEL) rose 2.64 percent after a minister said the government had no plans to divest some of its shareholding in the company.

Investors are also keeping a close watch on the initial public offerings of Alkem Laboratories which was subscribed 60 percent at 12:48 p.m., and Dr. Lal Pathlabs, which was subscribed 88 percent. Bookbuilding ends on Dec. 10 for both issues.

(Reporting by Karen Rebelo in Mumbai; Editing by Biju Dwarakanath)