Indian shares fall 0.8 pct; Reliance, L&T drop

* Economic worries, earnings jitters hit markets worldwide

* Weak monsoon, budget disappointment keep investors wary

* Shares to track world markets in near term

* Bharti Airtel, Reliance Infra among major losers
(Updates to close; adds details, analyst comments, European
markets performance)

By Pratish Narayanan

MUMBAI, July 13 (Reuters) - Indian shares fell 0.8 percent
on Monday to their lowest close in two months, as niggling
worries about the health of the world economy and uncertainty
over corporate earnings reduced risk-appetite across Asia and
Europe.

Major losers spanned companies from energy giant Reliance
Industries (RELI.BO) and engineering and construction
conglomerate Larsen & Toubro (LART.BO) to top telecoms firm
Bharti Airtel (BRTI.BO).

Analysts said foreign funds, which had been the main driver
for the market to rally nearly a half in the June quarter, were
on the backfoot now with prospects for a swift world economic
recovery fading.

"Risk-appetite abroad is going to determine how well
emerging markets perform," Avinash Gupta, assistant vice
president of equity research at Bonanza Portfolio Ltd, said
from New Delhi.

"To that extent, global markets are going to impact India."

The 30-share BSE index .BSESN ended down 0.77 percent, or
103.90 points, at 13,400.32, with 21 stocks declining, after
falling as much as 2.1 percent during trade.

It was the lowest close since May 15. The next trading
day,
the benchmark had jumped 17 percent after Prime Minister
Manmohan Singh's coalition won re-election comfortably and
spurred hopes for fast-paced reforms to boost growth.

But the budget last Monday focused on social spending
programmes, had little to offer for reforms and set a huge
deficit of 6.8 percent of gross domestic product, the highest
in 16 years.

"The market had run up quite a bit, and the disappointing
budget provided the trigger for a correction," Gupta said.

After rallying 22.5 percent since the election verdict, the
BSE index dropped 9.4 percent last week in its biggest weekly
fall in eight months that took it below the close on May 18.

Sentiment was also hit after monsoon rains, crucial for
India's domestic demand-led economy, made a weak start in June.

"For now, there is no fresh trigger to attract investors to
the market," said Pisupati Subramanyam, president at Ventura
Securities.

Asian shares fell on Monday, with Japan's Nikkei .N225
losing 2.6 percent, while MSCI's measure of other Asian markets
.MSCIAPJ dropped 2.8 percent.

At 1014 GMT, the FTSEurofirst 300 .FTEU3 index of top
European shares was down 0.4 percent.

"We are going to react to overseas markets for a while, and
the amount of foreign fund inflows and liquidity coming into
the market will determine how it performs," Subramanyam said.

However, analysts do not see a significant fall in shares
as longer-term prospects for the market remained bright.

The benchmark is still up by more than two-thirds from a
2009 low in early March, and has risen almost 40 this year
after losing more than half its value in 2008.

Investors will watch corporate results for clearer signs of
an economic recovery, traders said. For a preview on Asian
firms' April-June earnings, double-click [ID:nSEO367710]

Reliance Industries, India's largest-listed firm with the
most weight in the main index, fell 1.7 percent to 1,747.85
rupees, while Larsen & Toubro dropped 2.1 percent to 1,330.35
rupees.

Bharti Airtel, which is in exclusive merger talks with
South Africa's MTN (MTNJ.J), eased 2.1 percent to 766.20
rupees, while Reliance Infrastructure (RLIN.BO) slid 6.1
percent to 966.65 rupees.

In the broader market, losers led gainers by more than 3.5
to 1 on relatively light volume of 292.4 million shares.

The 50-share NSE index fell 0.75 percent to
3,974.05.

MAIN TOP 3 BY VOLUME

* Unitech (UNTE.BO) on 24.7 million shares

* Suzlon Energy (SUZL.BO) on 15.6 million shares

* Reliance Natural Resources (RENR.BO) on 9.5 million
shares

STOCKS THAT MOVED

* IL&FS Investment Managers Ltd (ILFS.BO) rose 6 percent to
132.60 rupees after the company said late on Friday its board
would meet on Wednesday to consider a stock split.

* Nagarjuna Construction (NGCN.BO) fell 3.5 percent to
119.95 rupees after the company said it dropped a proposal to
issue share warrants to Blackstone (BX.N) as it had not
received approval from the Foreign Investment Promotion Board.
[ID:nBMB005828]

* Indowind Energy (INWI.BO) climbed 9.8 percent to 36
rupees after it said its April-June profit rose 60 percent.
[ID:nBMB005829]

FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* India rupee off 2-mo low on profit-taking; stocks
[INR/]
* India bond yields down on finmin comment, less supply
[IN/]
* Yen extends gains, hits 5-mth high vs dollar - EBS
[FRX/]
* Oil falls towards $59 on economic outlook, shares [O/R]
* Earnings, economy worries shake investors [MKTS/GLOB]
* US stock futures signal losses ahead of key earnings
[.N] * For closing rates of Indian ADRs

INADR (Editing by Ranjit Gangadharan)