* FTSE 100 down 0.7 pct for 2.1 pct January decline
* Capita slumps after profit warning, dividend suspension
* SSE rises after raising profit outlook (Adds closing prices)
LONDON, Jan 31 (Reuters) - The FTSE 100 fell on Wednesday as shares in outsourcer Capita tanked after a profit warning, further weighing on the monthly performance of the UK's blue-chip index.
The index ended January down 2.1 percent after falling 0.7 percent on the day to 7,533.55 points, its lowest level since Dec. 21.
Earnings updates were the main focus on Wednesday, none more so than Capita's. The mid-cap company's shares tumbled by 47 percent, its biggest one-day loss, after it issued a profit warning, suspended its dividend and announced a rights issue.
Peers Babcock and Serco fell 2.5 percent and 6.3 percent respectively.
It has been a difficult month for the sector after the collapse of Carillion when banks pulled the plug on a business swamped by debt and pension liabilities.
"It's another tale of woe from the sector," said Hargreaves Lansdown senior analyst Laith Khalaf.
"A bit like Carillion, Capita's problems have been pretty long-running ... the company is in a state of turmoil and the new CEO has come in and set out a plan to get it into a state of recovery."
Elsewhere, shares in utility SSE were among the top gainers on the FTSE 100, climbing by 1.1 percent after the electricity and gas supplier raised its full-year profit outlook thanks to a rise in production from its renewable energy plants.
Paddy Power Betfair rose 0.6 percent on the back of an upgrade from broker Investec to "buy" from "hold" and a price target increase from HSBC.
British housebuilders brought up the rear, with shares in Persimmon, Berkeley Group and Taylor Wimpey all down more than 2 percent. The falls followed a media report saying that the government could rescind planning permission on unused land.
Declines among cyclical sectors such as energy, materials and financials also weighed. These sectors, which are more sensitive to the economic cycle, made a strong start to the year as investors bet on a global boom lifting equities but have since succumbed to profit-taking.
(Reporting by Kit Rees; Additional reporting by Danilo Masoni)