Indian shares slip after Moody's cuts outlook to 'negative'

* Both NSE, BSE indexes down 0.2%

* PSU bank stocks decline

* Realty stocks extend gains

Nov 8 (Reuters) - Indian shares inched lower on Friday after Moody’s Investors Service lowered its ratings outlook to “negative” from “stable”, saying it was increasingly likely that economic growth will remain lower than in the past.

Moody’s said the change in outlook partly reflected government and policy ineffectiveness in addressing economic weakness, which led to an increase in debt burden from already high levels.

However, losses in equities were capped as realty stocks extended their sharp gains from the previous session.

“Market reaction will depend on institutional view on the development, will FIIs cut India exposure remains to be seen,” said Deepak Jasani, head of retail research at HDFC Securities.

“If they agree with Moody’s assessment and don’t have an alternative, there may not be a rush to exit.”

The broader NSE Index was down 0.23% at 11,986.50, as of 0355 GMT, while the benchmark BSE Index fell 0.18% to 40,585.72. The rupee weakened as much as 0.49% to 71.31 against the dollar.

The Nifty PSU Bank index, which tracks state-run lenders, was the top loser among NSE sectoral indexes, slipping nearly 1%.

Oil marketing companies Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd declined over 1.4% each.

Automakers Ashok Leyland and Mahindra and Mahindra Ltd fell as much as 1.24% and 0.55%, respectively, ahead of their quarterly results later in the day. This pushed the NSE auto index lower by more than 0.5%.

Meanwhile, the Nifty realty index rose more than 2% after Thursday’s 0.9% gain, with DLF Ltd adding nearly 5%.

Late on Wednesday, the government approved 100 billion rupees ($1.41 billion) for a fund to help clear stalled housing projects.

GlaxoSmithKline Consumer Healthcare Ltd rose as much as 1.16% after the drugmaker reported a strong set of quarterly numbers. (Reporting by Chandini Monnappa in Bengaluru; Editing by Subhranshu Sahu)