Indian shares post best qtrly rise in 17 years

* BSE index up 49 pct in June qtr, highest since March qtr
1992
* Best qtrly gain in Asia after Vietnam
* Index drops 2 pct on Tuesday; down 0.9 pct in June
* Monsoon, budget, Q1 results to set trend in coming months
(Updates to close)

By Ami Shah

MUMBAI, June 30 (Reuters) - Indian shares fell 2 percent on
Tuesday, but rallied by almost a half during April-June in
their biggest quarterly gain in 17 years as investors rode on
signs of an economic recovery and hopes for market-friendly
policies.

The outlook for the coming quarter will depend upon how
much Prime Minister Manmohan Singh's ruling coalition,
re-elected in May with a stronger mandate, lives up to market
expectations for reforms such as further opening up the economy
to foreigners and stake sales in state companies.

Progress of annual monsoon rains, which provide a lifeline
to India's trillion-dollar economy, the federal budget next
Monday and quarterly company results in July should set the
trend.

"Most positives are already factored in our prices, whereas
disappointments are not. So, we don't see much of upside from
here," said Ambareesh Baliga, vice-president of Karvy Stock
Broking.

The 30-share BSE index .BSESN jumped 49.3 percent in the
three months to June 30, behind only Vietnam in Asia that rose
around 60 percent in the quarter.

It was the biggest rise for the benchmark since it soared
124.5 percent in the March quarter of 1992 when Manmohan Singh,
who was then finance minister, kicked off reforms to open up
the economy.

Energy giant Reliance Industries (RELI.BO), which has the
most weight in the index, fell 2.95 percent on Tuesday to
2,023.35 rupees, but leapt almost a third in the quarter.

Private-sector lender ICICI Bank (ICBK.BO) shed 3.6 percent
to 722 rupees, but more than doubled in April-June.

Traders said stocks were pricey after the rally and there
would be investor resistance. The index was trading at one-year
forward price to earnings multiple of around 17, Thomson
Reuters data showed.

The index fell 1.97 percent, or 291.90 points, on Tuesday
to 14,493.84 points, its biggest one-day percentage fall in
nearly two weeks, as investors took profits ahead of the
budget.

The benchmark shed 0.9 percent in June, its first monthly
drop since February.

"Our understanding is that, in the July-September quarter,
the market would be in a profit booking mode," said Amitabh
Chakraborty, president of equities at Religare Capital.

GMR Infrastructure (GMRI.BO), part of the group in the
consortium building the New Delhi airport, called off a share
sale on Tuesday because of poor investor demand even after
slashing the size by four-fifths to $100 million.

Its shares fell 8.8 percent to 141.65 rupees.

Companies in India had launched on Monday share sales for
nearly $2 billion, hoping the stock market rally would have
revived investor appetite. [ID:nBOM344747]

In the broader market, losers outpaced gainers in the ratio
of 2.4:1 on relatively heavy volume of nearly 500 million
shares.

The 50-share NSE Index closed 2.27 percent lower at
4,291.10 points.

STOCKS THAT MOVED

* JM Financial Services Ltd (JMSH.BO) closed 4.9 percent
down at 44.65 rupees after the provider of leasing and
financial services posted a 14.5 percent fall in March-quarter
net profit.

* Real estate firm Ackruti City (ACKR.BO) closed 2.1
percent lower at 512.15 rupees, after the company reported its
fiscal year net profit dropped 11 percent.

TOP 3 STOCKS BY VOLUME

* Cals Refineries (CALS.BO) on 93.5 million shares

* Suzlon Energy (SUZL.BO) on 24.8 million shares

* Unitech (UNTE.BO) on 20.3 million shares

FACTORS TO WATCH
* For technical analysis, double click on
www.reutersindia.net
* Indian rupee report
[INR/]
* Indian bond report
[IN/]
* FOREX-Dollar pressured as risk sentiment improves
[FRX/]
* Oil rises above $72, after hitting 8-month high
[O/R]
* World stocks eye best quarterly gain, oil leaps
[MKTS/GLOB]
* U.S. stock futures point to a higher start
[.N]
* For closing rates of Indian ADRs
INADR
(Additional reporting by Devidutta Tripathy; Editing by Ranjit
Gangadharan)