* NSE index down 1 pct, BSE 0.9 pct lower
* NSE down about 0.5 pct for the year
By Tanvi Mehta
Dec 26 India's NSE index fell about 1
percent on Monday to a seven-month low, erasing its gain for the
year, as investors fretted that the government may impose
long-term capital gains tax.
Prime Minister Narendra Modi said on Saturday that people in
financial markets must make a "fair contribution" to nation
building, comments that were seen as setting up the prospect of
higher taxes for investors.
However, Finance Minister Arun Jaitley clarified on Sunday
that the government did not plan to impose long-term capital
gains tax, though that was not enough to prevent selling on
Indian shares were headed for an eighth session of declines
in nine amid worries about outflows from emerging markets to the
United States and continued concerns about India's move to ban
higher-value currency notes.
"It (reaction to PM's comments) is a knee-jerk reaction,"
said Gaurang Shah, vice president, Geojit BNP Paribas.
"The fact that we have broken certain levels since Brexit
day low, could be spooking markets further."
The NSE index fell as much as 1.15 percent to 7,893.80, its
lowest since May 25. It has erased its gain for the year and was
last down about 0.5 percent for the year.
The index was down 0.97 percent at 7,908.45 as of 0621 GMT
The benchmark BSE index was 0.87 percent lower at
25,814.75 after falling as much as 1.1 percent to its lowest
since Nov. 21 earlier in the session.
In another sign of nerves in markets, the NSE's India
Volatility index surged 8.3 percent.
Banking stocks fell, with HDFC Bank and ICICI Bank
among the biggest contributors to the decline.
The NSE Bank index fell as much as 1.55 percent
to its lowest since June 29.
Consumer and material stocks also dragged down the indexes
with the Nifty Metal index shedding as much as 2.80
percent to its lowest in over a month.
(Reporting by Tanvi Mehta in Bengaluru; Editing by Subhranshu