Indian shares slide 1.5 pct; Reliance Ind drags

* Stocks retreat after weak European mkts hit sentiment

* Valuations rich, institutional buying low - traders

* Wipro flip-flops after result, outlook
(Recasts, adds closing prices, details, analyst comments,
European markets performance)

By Pratish Narayanan

MUMBAI, July 22 (Reuters) - Indian shares erased early
gains and fell 1.5 percent on Wednesday, extending losses into
a second session, as a weak start to European markets doused
risk-appetite and sparked profit-taking.

Energy giant Reliance Industries (RELI.BO), outsourcer
Infosys Technologies (INFY.BO) and private-sector lender ICICI
Bank (ICBK.BO) led the fall after they had climbed 10-15
percent over the past week.

The 30-share BSE index .BSESN ended down 1.46 percent, or
219.37 points, at 14,843.12, with 26 stocks declining, after
rallying as much as 2 percent at one stage.

The benchmark had shed 0.85 percent on Tuesday after rising
13.4 percent over the previous five sessions.

"Investors are taking up short positions, as there are no
triggers for the market to go up in the short term," Sonam
Udasi, vice president of research at BRICS Securities, said.

"And valuations are not exactly cheap. Corporate results
this quarter are not going to be anything extraordinary and
there is no reason for us to trade at a premium."

Wipro (WIPR.BO) seesawed, retreating from gains of 2.7
percent to end down 1.5 percent at 451 rupees after the No. 3
outsourcer reported a better-than-expected 12.8 percent rise in
quarterly profit, but joined its bigger rivals in giving a
cautious forecast due to uncertainty in the global economy.
[ID:nBOM484947]

Top power-equipment maker Bharat Heavy Electricals Ltd
(BHEL.BO) fell 2.9 percent to 2,150.90 rupees after it reported
a 23 percent rise in quarterly profit, but lagged forecasts.
[ID:nBMA003403]

Leading mortgage lender Housing Development Finance Corp
(HDFC.BO) fell 4.4 percent to 2,410.30 rupees after its 20.7
percent rise in quarterly profit just managed to meet
forecasts. [ID:nBMA003405]

The BSE index has been riding a rally across global equity
markets as a flurry of data signals the world economy is on the
long road to recovery, spurred by low interest rates and
hundreds of billions of dollars in stimulus spending by
governments.

"India is playing to the tune of overseas markets, and
short-term traders are making hay while the sun shines," D.D.
Sharma, vice president at Anand Rathi Securities, said.

Solid results from companies such as financial firm Goldman
Sachs (GS.N), chipmaker Intel (INTC.O), machinery maker
Caterpillar (CAT.N) and iPhone maker Apple AAPL.N have also
underpinned the rise in equity markets.

The Indian market has outperformed most other major
benchmark indexes during the recent rally, stoking concerns
about rich valuations.

The BSE index trades at 17 times one-year forward earnings,
outstripping benchmarks in other emerging markets such as
Brazil, Thailand, South Korea and Indonesia that trade at a
multiple of 11-13. Russia is at a forward multiple of just 7.1.

"Longer-term investors like domestic and foreign
institutions are not buying at present. There is no reason for
them to buy at these levels," Sharma said.

"There is downside risk to the market."

There are also worries a raft of equity sales to
institutions could draw liquidity away from the stock market.
[ID:nBOM492912]

Analysts said even though the market looks overstretched in
the short-term and may be vulnerable to profit-taking,
long-term prospects still look bright if corporate results
improve and economy growth picks up pace in the latter half of
the year.

India's central bank is expected to hold key rates steady
at its policy review next Tuesday as growth begins to show some
signs of revival and concerns about rising prices are seen
deterring further cuts, a Reuters poll showed. [ID:nBOM221365]

Still, ICICI Bank fell 1.4 percent to 760.85 rupees, while
No. 2 IT-services firm Infosys slid 1.2 percent to 1,919.20
rupees.

Reliance, India's largest listed firm with the most weight
in the main index, shed 2 percent to 1,977.30 rupees.

In the broader market, losers led gainers 1,388 to 1,244 on
above-average volume of 464.1 million shares.

The 50-share NSE index .NSEI fell 1.6 percent to
4,398.90.

Asian shares were mixed, with Japan's Nikkei .N225 rising
0.7 percent, while MSCI's measure of other Asian markets
.MSCIAPJ slipped 0.4 percent.

At 1039 GMT, the FTSEurofirst 300 .FTEU3 index of top
European shares was down 0.3 percent, after gaining for seven
consecutive sessions.

MAIN TOP 3 BY VOLUME

* Unitech (UNTE.BO) on 23.9 million shares

* Mahindra Satyam (SATY.BO) on 21.8 million shares

* Suzlon Energy (SUZL.BO) on 19.7 million shares

STOCKS THAT MOVED

* ING Vysya Bank (VYSA.BO) gained 8.6 percent to 201.15
rupees after the private sector lender's net profit for the
quarter ended June 30 rose 48 percent.

* Zensar Technologies Ltd (ZENT.BO) rose 7.5 percent to
145.15 rupees after the software services firm said late on
Tuesday its board would meet on July 23 to consider a share
buyback.

FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* Indian rupee weakens tracking share drop; dlr rise
[INR/]
* Indian bond yields down on buyback news
[IN/]
* Euro eases as stocks' fall dampens sentiment
[FRX/]
* Oil falls below $65 on build in U.S. crude stocks [O/R]
* World stocks slip back from 9-month highs [MKTS/GLOB]
* U.S. stock futures signal losses; eyes on Apple

[.N] * For closing rates of Indian ADRs

INADR (Editing by Ranjit Gangadharan)