UPDATE 6-Sainsbury tops forecast, stake sale hits shares

(Adds confirmation of Tchenguiz stake sale)

By Mark Potter

LONDON, Oct 8 (Reuters) - UK grocer J Sainsbury Plc (SBRY.L) posted quarterly sales towards the top end of forecasts, but its shares tumbled as major investor Robert Tchenguiz sold his stake and amid some concern over shoppers switching to cheaper ranges.

Shares in Britain's No.3 supermarket group fell as much as 17.9 percent to a four-year low of 258-1/2 pence as talk swirled that property tycoon Tchenguiz was looking to sell shares.

Sainsbury confirmed after the market close that Tchenguiz had sold his stake -- 88 million shares as well as derivatives linked to a further 84.9 million shares.

Sainsbury said like-for-like sales excluding fuel, a key industry growth measure, rose 4.3 percent in the second quarter to Oct. 4, driven by demand for cheaper own-brand goods and family ready meals as cash-strapped shoppers try to save money.

Forecasts ranged from 2.75 percent to 4.7 percent, with an average of 3.9 percent, in a Reuters poll of nine analysts.

Morgan Stanley analyst Nicole Quinn said the stock would normally have been boosted by such figures but they had been offset by the speculation over Tchenguiz's stake.

Traders reported talk that Icelandic bank Kaupthing KAUP.IC was selling Tchenguiz's shares at about 250 pence apiece, around 20 percent below Tuesday's closing price.