Indian shares fall 0.7 pct; Reliance, L&T drop

* Resistance emerges after 89 pct rally since early March

* Weak Asia markets weigh on sentiment, but some buying
seen

* Investors wary until budget in early July - traders

(Updates to mid morning)

MUMBAI, June 15 (Reuters) - Indian shares fell 0.7 percent
on Monday as renewed jitters about the world economy dented
sentiment across Asia and sparked profit-taking on a near 90
percent rally since early March.

But there were bouts of buying from some long-term
investors as they took advantage of the drop to enter the
market, traders said.

Energy giant Reliance Industries (RELI.BO), which had more
than doubled in value over the past three months, and
diversified engineering and construction conglomerate Larsen &
Toubro (LART.BO) that has near tripled over the period, led the
losses.

Non-ferrous metals producer Sterlite Industries (STRL.BO)
was also among the major losers as copper prices slid
[ID:nSP424363].

Still, gains in leading lenders such as State Bank of India
(SBI.BO) and ICICI Bank (ICBK.BO) limited the losses.

By 11:27 a.m. (0557 GMT), the 30-share BSE index .BSESN
was down 0.7 percent at 15,126.91 points, with 14 stocks
declining. It fell as much as 1.3 percent earlier and briefly
turned positive.

The benchmark index had raced up 89 percent from a 2009 low
in early March, largely driven by foreign funds who ploughed
more than $7.5 billion into the market since mid-March.

Rising optimism about the global economy and hopes for
pro-market reforms such as a relaxation of foreign investment
rules in the pension and insurance sectors, privatisations and
higher infrastructure spending after the ruling coalition was
re-elected last month have also underpinned the market.

The main index is up about 58 percent this year, after
plunging by more than half in 2008 when foreign investors
withdrew $13 billion.

However, there are concerns the run-up is overdone, with
valuations not in line with fundamentals.

"Definitely the market looks stretched. Today no one wants
to buy aggressively as there are genuine concerns that there
will be more of a correction," Arun Kejriwal, a strategist at
research firm KRIS, said.

"This is likely to continue for at least a few days, maybe
even a week."

Traders said investors will remain cautious ahead of the
annual budget in early July, when the coalition government is
expected to announce plans to pursue investor-friendly reforms
to boost growth.

Reliance Industries, which has the most weight in the main
index, shed 4.2 percent to 2,257 rupees, while Larsen & Toubro
dropped 1 percent to 1,567 rupees.

Sterlite fell 4.5 percent to 686.15 rupees.

State Bank of India, the country's top lender, rose 1.5
percent to 1,660.90 rupees, while ICICI Bank gained 0.6 percent
to 745.05 rupees.

In the broader section, losers led gainers 2 to 1 on
relatively low volume of 171 million shares.

The 50-share NSE index was down 0.4 percent at
4,567.

Asian shares were lower on Monday, pulling back from
eight-month highs hit earlier this month, as investors fretted
over whether the global economy had improved enough to justify
a further rally. [ID:nT24036]

Japan's Nikkei .N225 was down 0.9 percent, while MSCI's
measure of other Asian markets .MSCIAPJ fell 1.8 percent.

MAIN TOP 3 BY VOLUME

* Reliance Natural Resources (RENR.BO) on 35.8 million
shares

* Satyam Computer (SATY.BO) on 8.3 million shares

* Suzlon Energy (SUZL.BO) on 6.5 million shares

STOCKS ON THE MOVE

* Wind turbine maker Suzlon Energy (SUZL.BO) rose 2.1
percent to 121.45 rupees after the Economic Times reported it
is considering the sale of part or all of its stake in Belgian
company Hansen Transmissions (HSNT.L) in a bid to repay part of
its debt. [ID:nDEL427724]

* Indian Hotels Co Ltd (IHTL.BO) gained 1.4 percent to
76.45 rupees after it said late on Friday it plans to buy a
controlling stake in Elel Hotels and Investment that holds the
sublease for the land on which a hotel is located in north
Mumbai for 6.8 billion rupees ($143 million).

FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* Indian rupee near 3-wk lows on dlr gains, stocks
[INR/]
* Indian bond yields down on small saving rate cut report
[IN/]
* Dollar up as bets on riskier assets trimmed
[FRX/]
* Oil falls as dollar gains, Iran poses upside risk [O/R]
* US dollar rebounds, commodities sag in soft trade
[MKTS/GLOB] * Defensives lift Dow, S&P; tech weighs on Nasdaq

[.N] * For closing rates of Indian ADRs

INADR (Reporting by Pratish Narayanan; Editing by
Dhara Ranasinghe)