* Auction attracts bids for 156.9 mln shares vs 128.9 mln issue
* Not enough interest to take up option to sell another 5 pct
* NALCO shares close 8.5 pct lower in weak market (Adds final bid data, details)
MUMBAI, March 15 India raised $116 million by selling shares in state-run National Aluminium Co Ltd (NALCO) on Friday, taking the government closer to its fundraising target to reduce the budget deficit.
The single-day NALCO auction received bids for a total of 156.94 million shares, at a weighted average price of 40.05 rupees, stock exchange data showed. The government's holding in the company will come down to 81 percent.
New Delhi was selling 128.86 million shares or a 5 percent stake, with an option to sell 5 percent more, at a minimum offer price of 40 rupees a share.
The share sale is part of the government's divestment drive to help restrict the fiscal deficit to 5.2 percent in the year ending March 31, to avoid becoming the first of the BRIC economies to have its credit rating downgraded.
Including the NALCO issue, the government has raised nearly $4.1 billion through the sale of shares in state-owned companies so far this fiscal year.
It expects to launch this month a 10.82 percent stake sale in steelmaker Steel Authority of India Ltd that could raise about $550 million, taking it close to its divestment target of $4.4 billion for the fiscal year.
NALCO, India's third-largest producer of aluminium, operates an alumina refinery, smelter plant and bauxite mines in the mineral-rich eastern state of Odisha.
Shares in the company, valued at about $2 billion, ended down 8.5 percent on Friday at 40.35 rupees, in a weak Mumbai market index. ($1 = 54.31 rupees) (Reporting by Prashant Mehra; Editing by Elaine Hardcastle)