Britain's FTSE gives up gains as grocers, Fed worries weigh

* FTSE 100 down 0.5 pct

* Supermarkets hit by Credit Suisse (NYSE: CS - news) comments

* Housebuilders surge on Berkeley results

* Eyes on Fed for hints of a rate hike

By Liisa Tuhkanen and Alistair Smout

LONDON, June 17 (Reuters) - Britain's top share index turned lower by mid-session on Wednesday as losses in grocers and caution before a Federal Reserve announcement later in the day weighed on the market.

The blue-chip FTSE 100 was down 0.5 percent at 6,678.40 at 1053 GMT, having traded as high as 6,731.54 points earlier.

The FTSE, which fell to its lowest since late January on Tuesday, has lost 5.6 percent over the past three weeks as investors worried about a Greek default and rising borrowing costs if the Federal Reserve raises its interest rates.

A Fed policy statement, due at 1800 GMT, will spell out how the bank's policymakers feel the U.S. economy has progressed and hint at whether the Fed intends to hike rates only once this year, or twice.

"It (Wednesday's pullback) is quite in keeping with the general mood of caution," Ken Odeluga, market analyst at City Index, said. "I think we're going to know a lot more (about market direction) after the Federal Reserve announcement today."

Among individual stocks, Sspermarkets Sainsbury, Morrison, Marks and Spencer and Tesco all fell more than 1 percent after bearish comments on grocers by Credit Suisse.

"We see few opportunities within a group that has historically misallocated capital, is faced with extreme competitive pressures and operates in a very low-growth environment," Credit Suisse analysts said in a note.

Mid-cap housebuilder Berkeley surged 7.9 percent after posting better-than-expected full-year profit. Peers Persimmon, Wolseley (EUREX: WLYH.EX - news) , CRH (NYSE: CRH - news) , Travis Perkins (LSE: TPK.L - news) and Barratt Developments also outperformed.

Persimmon (Other OTC: PSMMF - news) is up over 20 percent since the Conservatives won an unexpected majority at a general election in May. Traders expect more measures to support the housing market and less threat of a "mansion tax" from the opposition Labour party.

"Berkeley's figures have set the tone for the sector, and they're pretty impressive  when one stock in the sector charges higher like this, the others are bound to follow," Alastair McCaig, market analyst at IG (LSE: IGG.L - news) , said. (Editing by Larry King)