Indian shares fall 0.7 pct as rain worry weighs

* Poor rains dampen hopes for quick economic rebound

* Strong overseas data helps stocks rise on week

* ICICI falls on concerns slower economic growth will hurt

* ONGC, Reliance rise after oil rises
(Updates to close)

By Janaki Krishnan & Narayanan Somasundaram

MUMBAI, Aug 14 (Reuters) - Indian shares fell 0.7 percent
on Friday as poor rains dampened hopes for a rapid rebound in
Asia's third-largest economy, but a strong surge the previous
day helped lift the main index 1.7 percent for the week.

The top economic advisor to the prime minister said drought
would have an impact on growth in 2009/10 and he expected the
economy to expand 6 to 6.5 percent, lower than the 7 percent
forecast in the annual budget in early July.

"Exports are not doing well, industrial production is
showing signs of picking up, but the drought will have an
impact on growth," C. Rangarajan told reporters in the southern
city of Hyderabad.

With the U.S. economy showing signs of levelling out and
Germany and France emerging out of recession quicker than
expected, there was underlying support for the stock market.

However, traders expected the market to be choppy till
clarity emerged on the government's response to the weak
monsoon. "The market is highly confused and totally
indecisive," said Daljeet Kohli, research head at Emkay Stock
Broking. "On the downside there is drought, but its impact will
be long term and it will be felt two quarters from now."

The 30-share BSE index .BSESN fell 0.69 percent, or
106.86 points, to 15,411.63, with all but 5 stocks falling, a
day after rallying 3.3 percent to its best close in more than
week.

No. 2 lender ICICI Bank (ICBK.BO) led the losses on
concerns the weak monsoon would hurt an economic revival and
delay its plans to boost loan growth. The stock fell 1.7
percent to 744.15 rupees.

State-owned Oil and Natural Gas Corp (ONGC.BO) and energy
giant Reliance Industries (RELI.BO) rose as oil rose towards
$71 a barrel.

"The positive bias is coming from the liquidity. Public
offerings are getting adequately oversubscribed. Plus in
between we have sporadic positive news from global markets
which briefly boosts sentiments," Kohli said.

Adani Power and state-run NHPC Ltd have raised a combined
$1.9 billion since late July with the IPOs subscribed more than
20 times each.

Outsourcer Infosys Technologies (INFY.BO), which gets most
of its revenue from the United States, fell 1.2 percent to
2,039.85 rupees after U.S. retail sales for July came in much
weaker than forecast on Thursday.

The monsoon in India was 56 percent below normal over the
past week, government data showed on Thursday, disappointing
farmers for a third consecutive week while consumers felt the
pinch of rapidly rising food prices. [ID:nISL530612]

The wholesale price index INWPI=ECI fell in the year to
Aug. 1 for the ninth week in a row, but there were signs prices
could rise faster in the coming months due to the weak monsoon
and growing manufacturing demand. [ID:nISL472318]

Despite concerns about rich valuations after the benchmark
leapt 92 percent from a 2009 low in early March, a rush of
liquidity pouring into equity markets could support stocks in
the short term as investors look to buy on dips, traders said.

In the broader market, 1,427 gainers led 1,252 losers on
more than average volume of 442 million shares.

The 50-share NSE index .NSEI was fell 0.5 percent to
4,580.05 points.

MAIN TOP 3 BY VOLUME

* IFCI (IFCI.BO) on 22.6 million shares

* Ispat Industries ISPT.BO on 13.6 million shares

* Firstsource (FISO.BO) on 12.8 million shares

STOCKS THAT MOVED

* Energy explorer Cairn India (CAIL.BO) rose 3.3 percent
249.20 rupees on higher world crude oil prices.

* Aditya Birla Nuvo (ABRL.BO) shares rose 1.5 percent to
928.45 rupees after the Business Standard newspaper reported it
was in talks with global private equity players Blackstone
(BX.N), Carlyle and Kohlberg Kravis Roberts [KKR.UL] to sell a
stake in its proposed holding firm for its financial services
business.

* IndusInd Bank (INBK.BO) gained 2.7 percent to 95.60
rupees after the private-sector lender said its capital
adequacy ratio had risen to over 15 percent following its $100
million share sale to institutional investors. Higher capital
adequacy would help support the firm's loan-growth target of
25-30 percent in 2009/10, dealers said.

FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* India rupee weakens tracking local shares
[INR/]
* India bond yields rise after election results
[IN/]
* Euro slips, yen rises as stocks struggles
[FRX/]
* Oil rises towards $71/bbl on confidence for recovery [O/R]
* European data drives world stocks to 10-mth high [MKTS/GLOB]
* U.S. stock futures point to mixed Wall st open

[.N] * For closing rates of Indian ADRs

INADR (Editing by Ranjit Gangadharan)