Indian shares fall 1.3 pct, Infosys rises

* Rising oil prices dent investor confidence

* Financial stocks slip on higher inflation, rate worries

* Infosys up after it says better positioned to buy Axon
(Updates to close)

By Narayanan Somasundaram

MUMBAI, Aug 27 (Reuters) - Indian shares fell 1.3 percent
percent on Wednesday to their lowest close in almost a week, as
investor confidence was rattled after oil rose for a third day,
fanning higher inflation and borrowing cost worries.

Software bellwether Infosys Technologies (INFY.BO) bucked
the trend, after the company said it was better positioned than
other possible bidders for British consultancy Axon Group Plc
AXO.L because its offer had management backing.
[ID:nBOM37283]

The stock rose 0.6 percent to 1,708 rupees, a day after
easing 0.3 percent on concern a bidding war could push up the
acquisition cost and hurt earnings in the near term.

Financial stocks fell as oil climbed above $117 a barrel,
triggering worries the central bank may again tighten monetary
policy to douse inflation expectations. India imports about 70
percent of its oil.

"Investor confidence was shaken in late trade after oil
started moving up faster," said Jayesh Shroff, fund manager at
SBI Mutual Fund.

The 30-share BSE index .BSESN dropped 1.28 percent, or
185.43 points, to 14,296.79, its lowest close since Aug. 21.
All but five components fell. The benchmark is down almost 30
percent this year.

No. 2 lender ICICI Bank (ICBK.BO) dropped 2.7 percent to
648.85 rupees while leader State Bank of India (SBI.BO) fell 3
percent to 1,330.90 rupees, with annual inflation in mid-August
expected to hit 12.8 percent, the highest in more than 13
years. The data is due on Thursday. [ID:nBOM11283]

Top listed firm Reliance Industries (RELI.BO) slipped 1.5
percent to 2,147.85 rupees, its lowest close since July 29, a
day after it said it aimed to transfer an 80 percent stake in a
gas-rich deepwater block to four fully owned units.
[ID:nDEL201884]

"Lack of participation by the foreign funds is making it
tough to predict a clear direction. Markets would continue to
remain choppy with stock specific action," brokerage India
Infoline said in a note.

Foreign funds have sold nearly $7.4 billion of Indian
stocks this year on a slowing growth outlook, after pumping in
a record $17.4 billion in 2007.

In the broader market, 1,582 losers led 1,021 gainers on
volume of 216.7 million shares.

The 50-share NSE index .NSEI fell 1.05 percent to
4,292.10.

Elsewhere in the region, Karachi's 100-share index .KSE
fell 3 percent to 9,144.93, but Colombo's All-share index
.CSE edged up 0.1 percent to 2,406.39.

World stocks hovered around two-year lows with losses in
Europe and Japan. European stocks fell as weaker banking stocks
outweighed the impact of energy shares.

STOCKS THAT MOVED

* Jindal Photo Ltd (JINP.BO) rose 8.7 percent to 146 rupees
after its board decided to delist the company from the BSE.

* Kilburn Engineering Ltd (KLBE.BO) rose 6.5 percent to
37.10 rupees after the firm said it won orders and letters of
intent worth 149 million rupees for the supply of driers.

* Thomas Cook India (THOM.BO) rose 15.2 percent to 98.85
rupees after the company said its board approved raising up to
2 billion rupees through a rights issue.

* Nu Tek India Ltd (NUTK.BO) ended its first day of trading
at 199.30 rupees, up 3.8 percent from its issue price of 192
rupees.

MAIN TOP 3 BY VOLUME

* Nu Tek India on 13.1 million shares

* Reliance Natural Resources (RENR.BO) on 12.1 million
shares

* GTL Infrastructure Ltd (GTLI.BO) on 7.9 million shares

FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* Indian cbank sells dlr around 43.90-dealers
[INR/]
* Indian bond yields rise tracking higher oil prices
[IN/]
* FOREX-Dollar falls back from 2008 high on profit taking
[FRX/]
* Oil rises for 3rd day, eyes Tropical Strom Gustav
[O/R]
* GLOBAL MARKETS-World stocks near 2-year lows, storm lifts
oil [MKTS/GLOB]
* Wall St set for weaker open; banks eyes
[.N]
* For closing rates of Indian ADRs
INADR
(Editing by Ranjit Gangadharan)