BSE Sensex falls 1.2 pct; Reliance, L&T drop

People walk past the Bombay Stock Exchange (BSE) building displaying India's benchmark share index on its facade, in Mumbai September 30, 2009.

MUMBAI (Reuters) – The BSE Sensex slid 1.2 percent on Thursday, tailing lower Asian peers and investor worry about direction following sharp swings over the past two days.

Energy giant Reliance Industries fell 2.1 percent to 1,879.80 rupees, as investors awaited the hearing in its gas dispute with Reliance Natural Resources to resume during the day.

One of the judges withdrew from the Supreme Court hearing on Wednesday, citing potential conflict of interest.

Engineering and construction firm Larsen & Toubro shed 2.3 percent to 1,512 rupees, after The Financial Express reported its outsourcing unit was in talks to buy a majority stake in Patni Computer Systems.

Patni Computer was trading 5.3 percent higher at 481 rupees.

By 11:06 a.m. (0536 GMT), the 30-share BSE index was trading down 1.2 percent at 15,720.01, with 22 of its components declining.

"The recovery that we saw yesterday after a continuous fall, is likely to be tentative," said Gajendra Nagpal, CEO of Unicon Financial. "Though a huge downside is unlikely, some pain still remains. Investors are cautious for now."

The benchmark index had risen 3.3 percent on Wednesday after falling 8.4 percent over six sessions. Traders said they were also awaiting the weekly inflation

data due by midday (0630 GMT).

The annual inflation rate is forecast to have edged up to 1.64 percent as at Oct. 24 from 1.51 percent a week earlier, with food prices expected to have risen marginally, a Reuters poll showed.

Leading telecom companies Bharti Airtel and Reliance Communications (RLCM.BO) were up 2 percent and 2.8 percent respectively, on bargain hunting by long-term investors after a recent sharp fall.

The stocks were also helped by an Economic Times report that the telecom ministry would seek a fast-track approval from the finance ministry to cut the annual licence fee paid by large operators by up to a third.

Bharti and Reliance Communications have shed more than 25 percent and 43 percent respectively since the start of October, on disappointing September quarter results and a pricing war.

Around 73 million shares changed hands on the Bombay Stock Exchange, while losers nearly matched the number of gainers in the broader market.

The 50-share NSE index was down 1 percent at 4,662.65.

STOCKS ON THE MOVE

* Maytas Infra rose by daily limit of 5 percent to 149.45 rupees after it got a contract worth 7.9 billion rupees from IL&FS Transportation Networks to build a part of a four-lane highway in the western state of Maharashtra.

* Vehicle marker Eicher Motors was up 1.6 percent at 514.80 rupees, after its joint venture with Sweden's Volvo said Indian sales of Eicher-branded commercial vehicles rose 71 percent in October.

MAIN TOP 3 BY VOLUME

* Suzlon Energy on 9.8 million shares

* IFCI on 8.2 million shares

* Unitech on 4.9 million shares

(Reporting by Ami Shah; Editing by Ranjit Gangadharan)