Economy-Finance

Indian shares end down 0.45 pct; banks recover

 * Shares pull back from big early losses

 * Financial issues recover as rate worry eases (Updates to close)

 By Sumeet Chatterjee

 BANGALORE, Sept 1 (Reuters) - Indian shares recovered fromsharp early losses to finish down 0.45 percent on Monday, afterinvestors covered their short positions in financial issues onhopes interest rates would hold in the near term.

 Traders said a drop in annual inflation in mid-August and asharply lower economic growth in the June quarter would likelydiscourage the central bank from raising rates, although pricepressures continue to be a worry.

 Shares in top lender State Bank of India (SBI.BO: Quote, Profile, Research, Stock Buzz) ended up0.9 percent at 1,416 rupees, after falling as much as 3.1percent during trade. No. 2 ICICI Bank (ICBK.BO: Quote, Profile, Research, Stock Buzz) pulled backfrom a 3.2 percent slide to close down 1 percent at 664.55rupees.

 "Most of the negatives have already been built into thebanking stocks and they have the potential to surprise on thepositive side," said Amitabh Chakraborty, president of equitiesat Religare Securities.

 The 30-share BSE index .BSESN closed 66.02 points lowerat 14,498.51, with 18 components falling.

 The benchmark, which had rallied 3.7 percent on Friday,fell as much as 1.95 percent during trade. It is down 28.5percent this year, on diminishing growth outlook for theeconomy.

 Traders said a fall in oil prices to below $115 a barrel by1140 GMT was good for India. High energy prices have been a keyfactor behind inflation soaring to double-digits this year.

 Oil fell on Monday as Hurricane Gustav showed no signs ofpicking up more strength as it barrelled toward the Louisianacoast after forcing the shutdown of nine refineries and nearlyall U.S. Gulf of Mexico oil production. [O/R]

 Annual inflation in mid-August eased to 12.4 percent, below12.6 percent a week earlier, data showed last week as prices ofsome raw materials and fuels fell but analysts saw it headingup to peak in December due to pressures in manufacturing, foodand minerals.

 "The lower-than-expected inflation has given some hope thatthere will not be aggressive rate hikes," Chakraborty said.

 India's economy grew at its slowest annual pace in 3-½  years in the June quarter, data showed last week, as highinterest rates curbed spending.

 The Reserve Bank of India has raised its main lending ratethree times since early June to a seven-year high of 9.0percent. It has also raised banks' reserve requirements to reinin inflation that was running at 12.4 percent in mid-August.

 Shares in Infosys Technologies (INFY.BO: Quote, Profile, Research, Stock Buzz) fell 1.4 percentto 1,723.30 rupees after Dell (DELL.O: Quote, Profile, Research, Stock Buzz), the world'ssecond-largest computer maker, posted a sharp drop in earningsand warned that companies worldwide were trimming technologyspending.

 Maruti Suzuki (MRTI.BO: Quote, Profile, Research, Stock Buzz), 54.2 percent-owned by Japan'sSuzuki Motor Corp (7269.T: Quote, Profile, Research, Stock Buzz), ended down 2.6 percent at 633.75rupees after India's top carmaker said its sales in August fell9 percent. [ID:nBMA001343]

 In the broader market, 1,337 gainers led 1,262 losers onvolume of 217 million shares.

 The broader 50-share NSE index  fell 0.26 percent to4,348.65.

 Elsewhere in the region, Karachi's 100-share index edged up 0.02 percent at 9,210.15, while Colombo's All-Shareindex .CSE fell 0.02 percent to 2,408.18.

 STOCKS THAT MOVED

 * Tata Steel (TISC.BO: Quote, Profile, Research, Stock Buzz) lost 2.7 percent to 584.30 rupeesafter the steel minister said the government would step in tolower steel prices if needed. [ID:nDEL240032]

 * Shares in Resurgere Mines & Minerals Ltd (RESU.BO: Quote, Profile, Research, Stock Buzz) endedat 524.35 rupees on their debut, against the issue price of 270rupees. It opened at 272.05 rupees and rose as high as 562.80rupees.

 * Airline shares such as Jet Airways (JET.BO: Quote, Profile, Research, Stock Buzz) rose nearly 3percent to 486.45 rupees, SpiceJet (SPJT.BO: Quote, Profile, Research, Stock Buzz) added 2.2 percentto 27.90 rupees and Deccan Aviation (DECA.BO: Quote, Profile, Research, Stock Buzz) gained 4.5percent to 82.90 rupees after state-run oil firms slashed airturbine fuel prices by 16 percent with effect from Sundaymidnight.

 MAIN TOP 3 BY VOLUME

 * Reliance Natural Resources (RENR.BO: Quote, Profile, Research, Stock Buzz) on 12 million shares

 * Chambal Fertilisers & Chemicals (CHMB.BO: Quote, Profile, Research, Stock Buzz) on 5 millionshares

 * IFCI (IFCI.BO: Quote, Profile, Research, Stock Buzz) on 4 million shares

 FACTORS TO WATCH * For technical analysis double click on www.reutersindia.net * Indian rupee trims losses as banks unwind positions  [INR/] * Indian bond yields trim gains as investors buy        [IN/] * FOREX-Battered sterling helps feed dollar revival    [FRX/] * Oil falls as Gustav shows no sign of strengthening    [O/R] * GLOBAL MARKETS-Downturns and blowdowns rattle investors[MKTS/GLOB] * For closing rates of Indian ADRs                    INADR (Editing by Ranjit Gangadharan)