Indian shrs choppy in early trade, Hindalco drops

* Shares unable to sustain gains in choppy trade

* Larsen & Toubro leads gains

* Hindalco drops 3 pct after poor results (Updates to mid-morning)

MUMBAI, July 1 (Reuters) - Indian shares see-sawed in early trade on Wednesday as nervousness ahead of the federal budget next week kept gains in check after the market had slipped 2 percent in the previous session.

Engineering and construction firm Larsen & Toubro (LART.BO) led the gains after it said it had bagged two large orders, while shares of auto makers were positive on hopes of strong monthly sales.

By 11.00 a.m. (0530 GMT), the 30-share BSE Index .BSESN was up 0.4 percent at 14,552.40 points, with 23 of its components gaining. It slipped into the red early, before recovering to more than 1 percent.

"The volumes are strong, but people are taking more daily positions. Future direction should only be known after the budget measures," said K. K. Mital, chief executive for portfolio management services at Globe Capital Market.

"There are worries over government's fiscal position, stake dilution in public sector firms and lack of demand for share sales," Mital said.

Indian shares rose nearly 50 percent in April-June for their best quarterly gain in 17 years, but there is uncertainty over budget announcements. Many market watchers hope new moves will be unveiled to open up the economy further as well as stake sales in state companies.

Top engineer Larsen & Toubro rose 1.4 percent to 1,590 rupees after the firm said it won orders worth $135 million.

Largest-listed Reliance Industries (RELI.BO) also rose 0.5 percent to 2,034.90 rupees after it ruled out signing a gas supply agreement with former group firm Reliance Natural Resources Ltd (RENR.BO)[ID:nBOM424091], assuaging market sentiment its profits would have fallen on the deal.

Auto firms were in focus on hopes of improving sales.

Top car maker Maruti-Suzuki (MRTI.BO), which reported a 23 percent jump in June sales, was up 1.2 percent at 1,077.90 rupees. Top vehicles maker Tata Motors (TAMO.BO), due to report monthly numbers later Wednesday, was up 2.7 percent at 299 rupees.

Hindalco Industries (HALC.BO) was among key losers, down 3.2 percent to 83.70 rupees after India's top aluminium producer posted a 78 percent slump in 2008/09 consolidated profit.[ID;nBOM497773]

"There is a large amount of churning of portfolios, but people are not bringing in new money. The market is expected to trade in a 150-200 point range," said Arun Kejriwal, director at research firm KRIS.

In the broader market, 992 losers almost matched 989 gainers on average volume of 97 million shares.

The 50-share NSE Index was up 0.1 percent at 4,295 points.