INDIA STOCKS-Indian shares post worst day in over two months; IndiGo sheds 8%

By Vivek Kumar M

Dec 8 (Reuters) - Indian shares logged their worst session in more than two months on Monday, amid uncertainty over a trade deal with the U.S. and persistent foreign outflows, while the country's top airline IndiGo fell 8.3%, continuing to reel from an operational crisis.

The Nifty 50 .NSEI lost 0.86% to 25,960.55, and the BSE Sensex .BSESN slid 0.71% to 85,102.69, in their biggest single-day drop since September 26.

All 16 major sectors ended lower. The broader mid-caps .NIFMDCP100 and small-caps .NIFSMCP100 lost 1.8% and 2.6%, respectively.

Foreign investors have sold over $1 billion of local stocks on a net basis so far in December, putting the year-to-date outflows at nearly $18 billion, according to data from the National Securities Depository Ltd.

Investors were also cautious ahead of the U.S. Federal Reserve's policy decision later this week and over how effectively the Reserve Bank of India's rate cuts will be transmitted.

"RBI's rate cut transmission may not happen soon due high credit-deposit ratio. This, coupled with persistent tariff uncertainty, is weighing on the market," said Anita Gandhi, founder and head of institutional business at Arihant Capital Markets.

JP Morgan said the RBI's rate cut on Friday could be its last in this cycle, with inflation expected to rise to 4% and growth holding up.

Heavyweight financials .NIFTYFIN and information technology .NIFTYIT stocks slipped 0.7% and 0.3%, respectively.

Public sector banks .NIFTYPSU, real estate .NIFTYREAL, and defence .NIFINDDEFENCE sector indexes fell between 2.8% and 3.7%.

Among stocks, IndiGo INGL.NS was the biggest loser among Nifty 50 stocks, extending last week's slide.

The country's aviation watchdog issued a show cause notice to the airline after thousands of flights were cancelled last week, grounding tens of thousands of passengers.