* FTSE 100 falls, still outperforms European markets
* Rolls-Royce slumps after cutting profit forecasts
* Sunday's 'No' vote in Greece hurts euro zone equities (Adds details, quote)
By Sudip Kar-Gupta and Alistair Smout
LONDON, July 6 (Reuters) - A slump in Rolls-Royce led Britain's top equity index lower on Monday, although it outperformed continental European indices after Greece voted to reject a bailout under conditions imposed by its creditors.
Engineering company Rolls-Royce was the worst-performing FTSE 100 stock, falling around 6 percent after the company cut its profit forecasts for this year and next.
The company cited weakness in oil and gas markets and lower demand in some of its aircraft business, increasing the challenge for a new chief executive.
Traders also expressed disappointment that a share buyback programme was being halted after Rolls Royce's third profit warning in nine months.
"A new chief executive may be in place, but it is the same story of investor disappointment as profit forecasts misfire for Rolls Royce," said Brenda Kelly, head analyst at London Capital Group.
The FTSE 100 index fell by less than other European markets, with some traders saying Britain was being viewed as a safe haven from the problems of the euro zone.
The FTSE was down 42.04 points, or 0.6 percent, at 6,543.74 points by 1359 GMT. Germany's DAX fell 1.3 percent and the euro zone's Euro STOXX 50 index dropped 2 percent.
"The British stock market is slightly outperforming given ... (it is) relatively less exposed to the problems in Greece," said Securequity sales trader Jawaid Afsar.
The FTSE 100 has erased gains made over the course of 2015 and is some 8 percent below a record high of 7,122.74 points set in April. Investor confidence has been undermined in part by uncertainty over Greece.
Greece's vote against the conditions for a bailout on Sunday put the country in uncharted territory, risking a banking collapse that could force it out of the euro. Without more emergency funding from the European Central Bank, Greece's banks could run out of cash within days.
Many banks now assume that Greece is likely to leave the euro. However, some investors said the resignation of Greece's controversial finance minister, Yanis Vaorufakis, showed that the government was willing to compromise to find a solution.
"There's the sign of some flexibility from the Greek side, and with Varoufakis resigning, it's a signal to Europe that it's not necessarily the case that Greece will leave the euro," Christian Gattiker, head of research at Julius Baer, said.
Editing by Jeremy Gaunt; Editing by Larry King