INDIA STOCKS-India's stock benchmarks edge lower ahead of Fed decision; IT drags

(Updates for markets close)

By Bharath Rajeswaran and Vivek Kumar M

Sept 15 (Reuters) - India's equity benchmarks inched lower on Monday, dragged by information technology stocks, as investors traded cautiously ahead of an expected U.S. Federal Reserve rate cut at its policy meeting this week.

The Nifty 50 fell 0.18% to 25,069.20, snapping an eight-session winning streak, its longest in a year. The BSE Sensex dipped 0.15% to 81,785.74.

The Nifty had risen 1.5% last week, supported by optimism over U.S.-India trade negotiations and government tax cuts aimed at boosting consumption.

"After the recent rebound, slight profit booking or a minor time-wise consolidation cannot be ruled out. However, such dips could offer fresh entry opportunities," said Dhupesh Dhameja, derivatives research analyst at SAMCO Securities.

On Monday, nine of the 16 major sectors advanced.

IT, which had climbed 4.3% last week, fell 0.6% and was the biggest drag.

Realty shares gained 2.4% on plans to ease height restrictions on buildings in the north Indian city of Noida and upbeat brokerage commentary.

Asian markets were flat ahead of the Fed meeting on Wednesday, with investors betting on a rate cut that could weaken the dollar and boost flows to emerging markets.

"While liquidity is tightening due to persistent foreign outflows, promoter selling, and a shift to robust initial public offerings, a Fed rate cut and progress in U.S.-India trade talks could quickly spark recovery," said G. Chokkalingam, founder and head of research at Equinomics Research.

Small-cap and mid-cap indexes rose 0.8% and 0.4%, respectively.

Telecom infrastructure firm Railtel Corp surged 6.5% on an order win worth 2.1 billion rupees ($23.81 million).

Defence stocks advanced after India unveiled a new procurement framework for armed forces.

Alcohol beverage companies Radico Khaitan and Allied Blenders rose about 3.8% and 3% respectively, after Jefferies initiated coverage with a "buy" rating.

Rice exporter KRBL tumbled 9.6% after an independent director resigned, citing corporate governance issues. ($1 = 88.1837 Indian rupees) (Reporting by Vivek Kumar M and Bharath Rajeswaran; Editing by Sumana Nandy, Eileen Soreng and Sonia Cheema)