May 3 (Reuters) - Australian shares extended their fall from the previous session as telecom, financial and basic material stocks declined, while investors also remained watchful of the U.S. Federal Reserve's policy meeting outcome.
The S&P/ASX 200 index was down 59.865 points, or 1.01 percent, to 5,890.5 at 0320 GMT. The benchmark had fallen 0.1 percent on Tuesday.
The Federal Reserve is expected to hold interest rates steady at its two-day policy meeting.
The losses on the benchmark were led by the telecom sector which saw Vocus Group fall as much as nearly 30 percent, its biggest intraday slide since March 2001, after it cut its forecast for the 2017 financial year.
In the financial sector, the 'Big Four' banks were down between 1.2 percent and 2.4 percent.
Australia's central bank held rates steady for a ninth straight month on Tuesday, as it balanced the risk of rising household debt against subdued inflation and wages growth.
"As far as inflation is concerned, it's back in the band, so there is very little chance of a rate cut coming. It's more likely that next year there's going to be a rate rise," said Mathan Somasundaram, market portfolio strategist at Blue Ocean Equities.
In the context of such an outlook, banks may find it hard to grow as households may exercise some frugality, he adds.
Financial stocks were also lower as sentiment, soured by ANZ's half-year results miss in the previous session, kept investors sceptical ahead of National Australia Bank's half-year results due in the next session.
The basic material sector was pulled lower as BHP Billiton , Rio Tinto and Fortescue Metals fell between 0.7 percent and 2.4 percent.
"Commodities have been falling for a bit now and will be continuing (to do so). We have seen weaker numbers out of the U.S. and out of China, compared with expectations which is probably playing into it."
Factory activity in the United States and China eased in April, with the latter slowing to its weakest in seven months.
Shares of Woolworth were down as much as 2.6 percent, the biggest intraday fall in more-than a month, after two gaining days. The stock rose as much as 2.5 percent in the previous session after posting strong quarterly sales numbers.
New Zealand's benchmark S&P/NZX 50 index snapped seven session of gains, falling 0.15 percent, or 11.17 points to 7,411.32.
Financial sector lost as Australian and New Zealand Banking Group's continued fall at 2.9 percent, pulled others in the sector lower.
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Reporting by Susan Mathew in Bengaluru; Additional reporting by Rushil Dutta; Editing by Jacqueline Wong