Indian shares shrug off rate cut, fall 0.7 pct

* Cbank cuts key rates by 25 bps; urges banks to follow

* Traders said move unlikely to boost credit growth sharply

* Banks, Infosys lead losses, tailing weak Asian markets
(Updates to close)

By Pratish Narayanan

MUMBAI, April 21 (Reuters) - Indian shares fell 0.7 percent
on Tuesday as traders shrugged off a rate cut by the central
bank and tailed weak Asian peers, with financial stocks among
the major losers.

The drop for the second day was the first two-day fall
since early March, and came after the market had rallied a
third over six weeks in a row.

"We had a nice momentum going, and now the market is taking
a small pause," said Bharat Dalal, fund manager at Dawnay Day
AV Securities, adding there was still steam to drive higher.

State Bank of India (SBI.BO), ICICI Bank (ICBK.BO),
outsourcer Infosys Technologies (INFY.BO) and engineering
conglomerate Larsen & Toubro (LART.BO) were among the top
losers.

The 30-share BSE index ended down 0.74 percent, or
81.39 points, at 10,898.11, with 17 stocks declining. It
seesawed through the session, falling nearly 2 percent early
and then rising as much as 0.8 percent after the rate cut.

India's central bank cut its key lending rate for the sixth
time in seven months on Tuesday and pushed commercial banks to
follow suit to bolster growth that has taken a
bigger-than-expected hit from the global downturn.
[ID:nBOM464601]

Traders said the cut was a token reduction and would not
translate to significantly higher credit growth.

"We were expecting something bigger than a 25 basis point
cut," Alex Mathew, head of research at Geojit Securities, said
from Kollam in southern Kerala state.

Government-run State bank of India, the country's top
lender, fell 3.1 percent to 1,255.35 rupees, while
private-sector rival ICICI Bank dropped 6.5 percent to 398.80
rupees.

No. 2 software-services firm Infosys shed 2.1 percent to
1,363.50 rupees, while Larsen & Toubro declined 3.4 percent to
853.80 rupees.

In the broader section, losers marginally led advancers
1,293 to 1,233 on relatively moderate volume of 473 million
shares.

The 50-share NSE index fell 0.35 percent to
3,365.30 points.

Asian stocks fell after a 41 percent quarterly increase in
bad loans at Bank of America (BAC.N) renewed fears of
deteriorating credit, sparking a Wall Street decline and
halting a rebound in risk taking.

"We are highly correlated with international markets. As
long as the Dow Jones index falls, selling pressure will
continue to be there," Mathew said.

MAIN TOP 3 BY VOLUME

* Unitech (UNTE.BO) on 20 million shares

* Suzlon Energy (SUZL.BO) on 17 million shares

* Reliance Natural Resources (RENR.BO) on 15.6 million
shares

STOCKS THAT MOVED

* Zensar Technologies (ZENT.BO) rose 10 percent to 109.35
rupees after the software services provider said profit for the
March quarter rose 23 percent.

* Axis Bank (AXBK.BO) fell 3.2 percent to 493.85 rupees
after Chairman and Chief Executive P.J. Nayak said he would
quit as he disagreed with the board's recommendation to appoint
Shikha Sharma as CEO and managing director.

* GHCL Ltd (GHCH.BO) dropped 8.7 percent to 29.25 rupees
after India's market regulator barred the founders of the
company from dealing in the securities market for incorrect
disclosures. [ID:nBOM378770]

FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* Indian bond yields ease, rupee up after rate cut [INR/]
[IN/]
* Euro jumps after ZEW but econ jitters remain
[FRX/]
* Oil steadies below $46 after near 9 percent fall [O/R]
* World stocks slip on credit worries, Europe up [MKTS/GLOB]
* Wall St futures point higher amid results flurry

[.N] * For closing rates of Indian ADRs

INADR (Editing by Ranjit Gangadharan)