Monsoon woes drag Indian shares down; Bharti drops

* Poor rains could hurt economic recovery

* Bharti falls on expectations of sweetened MTN bid

* Automakers, consumer-goods firms among major losers

* Outsourcers gain on U.S. revival hopes
(Updates with closing prices, details, analyst comments,
European markets performance)

By Pratish Narayanan

MUMBAI, Aug 10 (Reuters) - Indian shares fell 1 percent on
Monday to their worst close in more than three weeks on fears a
nascent economic revival would be scuppered by poor rains,
which are key to the country's domestic-demand-led economy.

Bharti Airtel (BRTI.BO) fell as much as 4.8 percent on
heavy volume to its lowest in more than three months on worries
the top telecoms firm may have to sweeten its bid for South
Africa's MTN (MTNJ.J).

Automakers such as Mahindra & Mahindra (MAHM.BO) and Maruti
Suzuki (MRTI.BO), and consumer-goods firms Hindustan Unilever
(HLL.BO) and ITC (ITC.BO) were among the major losers as weak
monsoon rains are expected to hit crucial rural demand.

India's prime minister asked state governments on Saturday
to take steps to deal with poor monsoon rains that have hit
sowing of important crops, leading to a sharp rise in prices of
food items like sugar. [ID:nSP92183] [ID:nL8620219]

Rains in India, where only 40 percent farmland is
irrigated, were 28 percent deficient at the weekend, raising
fears the June-September season may turn out to be as bad as
2004 when summer crop output fell 12 percent after a drought.
[ID:nDEL355904]

"A weak monsoon usually doesn't have an immediate impact;
we'll see its effects only in a few quarters," Sonam Udasi,
vice president of research at BRICS Securities, said.

"But with regards to sentiment, it will hit the market
immediately."

Energy giant Reliance Industries (RELI.BO), India's top
listed firm with the most weight in the main index, retreated
0.5 percent to 1,986.35 rupees.

The 30-share BSE index .BSESN ended down 0.99 percent, or
150.47 points, at 15,009.77, its third consecutive fall.
Twenty-four stocks declined, but trading was choppy, with the
benchmark gaining as much as 1.7 percent in early trade.

Better-than-expected U.S. jobs data boosted hopes for a
recovery in the world's largest economy, lifting IT-services
firms.

No. 2 outsourcer Infosys Technologies (INFY.BO) gained 2.2
percent to 2,086.80 rupees, while bigger rival Tata Consultancy
(TCS.BO) climbed 6 percent to 538.85 rupees.

"It's only because of the weak monsoon that the market is
behaving like this. Other than that, the market looks good," S.
Ranganathan, head of research at LKP Shares, said.

"Sectors that may be hurt by weak rains like consumer goods
and autos are victims of profit-taking."

Top carmaker Maruti Suzuki slid 3.1 percent to 1,251.40
rupees, while leading vehicle maker Tata Motors (TAMO.BO) eased
3.3 percent to 400.95 rupees.

No. 1 utility vehicle maker Mahindra & Mahindra dropped 9.1
percent -- its biggest one-day fall in more than nine months --
to 758.10 rupees. India's auto index .BEAUTO ended down 4.5
percent.

Automobile firms had reported better-than-expected profits
in April-June, helped by lower raw material costs, while their
July sales rose on new launches and easier finance, driving the
auto index up more than a third between July 13 and last
Wednesday.

Hindustan Unilever shed 3.5 percent to 260.45 rupees, while
ITC fell 2.7 percent to 223.95 rupees.

Bharti Airtel slid 2.5 percent to 374.15 rupees, its lowest
close in three months. About 3.7 million shares were traded,
nearly four times the daily average volume over the past 30
days.

Bharti and MTN, which have been working on a complex $23
billion cash-and-share swap for over two months, said a week
ago that exclusive talks would be extended until late August
and that the terms of the potential deal may be adjusted.

The two companies hope the deal will lead to a full merger,
creating the world's third biggest cell phone group, with more
than 200 million customers and combined revenue of $20 billion.

On Friday, a source familiar with the negotiations told
Reuters that Bharti may increase its offer by between 5 and 10
percent. [ID:nL6362142]

"We don't understand the logic for this deal at all. Why
does Bharti want to change from a company with a net cash
position of $1 billion to a debt-ridden firm?" BRICS
Securities' Udasi said.

"We do not buy the argument the deal is going to add value.
There is nothing in the deal to highlight as adding strategic
value."

In the broader market, losers led gainers by 2 to 1 on
below-average volume of 387.4 million shares.

The 50-share NSE index fell 1 percent to 4,437.65.

Asian shares were higher on Monday, with Japan's Nikkei
.N225 rising 1.1 percent, while MSCI's measure of other Asian
markets .MSCIAPJ was up 0.7 percent.

At 1039 GMT, the pan-European FTSEurofirst 300 .FTEU3
index of top shares was down 0.7 percent.