Indian shares fall 1 pct; Tata Steel, Sterlite drop

* Fall in China stocks leads drop in Asian markets

* DLF, Hindustan Unilever among major losers

* Sun Pharma drops as profit lags estimates

* Reliance bounces 0.8 pct after 6.3 pct fall over 3 days
(Updates with closing prices, analyst comments, details on
company results, valuations, China stocks)

By Pratish Narayanan

MUMBAI, July 29 (Reuters) - Indian shares slid 1 percent on
Tuesday, their third consecutive fall, as a sell-off in
Shanghai stocks on fears Chinese banks may begin to restrict
lending weighed on markets across Asia.

Chinese stocks .SSEC dropped 5 percent, their biggest
fall in eight months, dragging down India's main index as much
as 2.9 percent before it pared losses as analysts said any
moves by banks in China were unlikely to affect India.

China's banking regulator on Tuesday had urged lenders to
ensure that loans enter the real economy, rather than flow into
property and stock markets for speculation.

"Maybe China wants to suck up some liquidity in its market,
but that has nothing much to do with India," Deven Choksey,
chief executive of K.R. Choksey Shares and Securities, said.

"Our market was already set for a correction, and that is
what we are seeing today."

Dealers said disappointing results from Reliance Industries
(RELI.BO), Hindustan Unilever (HLL.BO), Sun Pharmaceutical
(SUN.BO) and Tata Steel (TISC.BO) had made investors cautious
and weakened the market momentum seen since mid-July.

Sun Pharma, India's top drug maker by market value, shed
5.2 percent to 1,188.25 rupees after it lagged forecasts with a
67 percent drop in quarterly net profit.

Top realty firm DLF (DLF.BO) fell 6.6 percent to 398.05
rupees, a day after climbing 3.4 percent. Hindustan Unilever
declined 3.2 percent to 268.05 rupees, extending losses of 7.3
percent on Tuesday after it posted a lower-than-expected
profit.

Tata Steel (TISC.BO) eased 5.8 percent to 441.90 rupees,
after reporting a bigger-than-than expected 47 percent fall in
profit from its Indian operations.

Non-ferrous metals producer Sterlite Industries (STRL.BO)
slipped 5.5 percent to 621.15 rupees as prices of base metals
in Shanghai fell sharply on Wednesday. The company posted a 42
percent fall in its June-quarter net profit.

The 30-share BSE index .BSESN ended down 1.03 percent, or
158.48 points, at 15,173.46, with 23 stocks declining, after
rising as much as 0.3 percent during trade.

Reliance Industries, which has the most weight in the main
index, rose 0.8 percent to 1,926.30 rupees after sliding 6.3
percent over the past three sessions.

"The market is in consolidation mode. Since the large caps
have already run up quite a bit, they are taking a breather,"
said Gajendra Nagpal, chief executive of Unicon Financial
Intermediaries.

"There are no major events the market is looking forward
to."

The Indian market is almost 90 percent above a 2009 low on
March 6, and is up over 57 percent this year -- fourth-best
among major benchmark indices tracked by Reuters -- after
slumping by more than half in 2008.

Valuations are rich, with the main index trading at 17.3
times one-year forward earnings, outstripping benchmarks in
several other emerging markets such as South Korea, Indonesia,
Philippines and Brazil that are at multiples of about 13.
Russia trades at 7.5 times forward earnings.

In the broader market on Wednesday, losers led gainers
1,565 to 1,096 on relatively heavy volume of 540 million
shares.

The 50-share NSE index .NSEI ended down 1.11 percent at
4,513.50.

Most Asian shares were lower on Wednesday, with MSCI's
measure of Asian markets other than Japan .MSCIAPJ falling
1.8 percent. Japan's Nikkei .N225 rose 0.3 percent.

At 1045 GMT, the pan-European FTSEurofirst 300 .FTEU3
index of top shares was up 1 percent.

MAIN TOP 3 BY VOLUME

* Unitech (UNTE.BO) on 30 million shares

* Suzlon Energy (SUZL.BO) on 21.5 million shares

* Reliance Natural Resources (RENR.BO) on 21.4 million
shares

STOCKS ON THE MOVE

* Alembic Ltd (ALMC.BO) rose 3.7 percent to 41.05 rupees
after the drugmaker posted a consolidated net profit in the
June quarter, compared with a loss in the same period a year
ago.

* Varun Shipping Co Ltd (VRNS.BO) fell 4.1 percent to 56.25
rupees after it said low tanker freight rates dragged its net
profit down by over 90 percent in the April-June quarter.

FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* Indian rupee extends fall on lower stx; mo-end demand
[INR/]
* Indian bond yields in narrow range; supplies eyed
[IN/]
* Dollar gains as investors shun risk
[FRX/]
* Oil falls below $66 after inventories rise [O/R]
* Shanghai surprise fails to dent Europe gains [MKTS/GLOB]
* U.S. stock futures signal losses; eyes on Yahoo

[.N] * For closing rates of Indian ADRs

INADR (Editing by John Mair)