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* NSE index up 0.03 pct, BSE index 0.05 pct lower
* Nifty PSU Bank index slides 0.8 pct
* Reliance Industries falls as much as 2.5 pct
By Jessica Kuruthukulangara
June 28 - India's NSE index traded flat on Wednesday as weakness in lenders on worries about provisioning for defaulted loans continued, while concerns of bloated valuations following a record-setting rally dampened risk appetite.
The Nifty PSU Bank index slid as much as 1.7 percent to its lowest in three months, a day after a news report said the central bank has ordered lenders to raise their provisioning against loans undergoing bankruptcy proceedings.
Indian shares recently started showing signs of fatigue after an extended record-setting run raised worries over near-term valuations.
The NSE index is up 16.2 percent this year so far. It last hit a record high on June 6.
"Markets are in a state of limbo," said Arun Kejriwal, founder of Kejriwal Research & Investment Services.
Tuesday's weakness has not gone away as there are concerns that valuations are pretty expensive, he added.
The broader NSE index was up 0.01 percent at 9,512.40 as of 0618 GMT, while the benchmark BSE index was 0.05 percent lower at 30,943.24.
State Bank of India declined as much as 2.1 percent. It had fallen 3.2 percent on Tuesday.
Reliance Industries Ltd fell as much as 2.5 percent, its biggest intraday percentage loss in three months, and was the biggest drag on both the NSE index and the BSE index. The stock had risen 32.8 percent this year as of Tuesday's close.
However, oil refiners gained as crude traded marginally lower after a report of rising U.S. inventories underscored concerns that a three-year supply glut is far from over.
Indian Oil Corp Ltd climbed as much as 2.4 percent while Bharat Petroleum Corp Ltd gained as much as 2.1 percent. (Reporting by Jessica Kuruthukulangara in Bengaluru; Editing by Vyas Mohan)