* Bharti, Reliance Comm drop over 11 pct on falling tariffs

 * Rising competition to also hit telcos' revenue - analysts

 * Investors wary after sharp market rally this year
 (Updates to late morning)

 MUMBAI, Oct 6 (Reuters) - Indian shares gave up early gains
and fell more than 1 percent on Tuesday as leading mobile
operators Bharti Airtel (BRTI.BO) and Reliance Communications
(RLCM.BO) tumbled over 11 percent on worries falling tariffs
and increasing competition will hurt the sector's
profitability.

 Investors were also wary large hedge funds may start taking
profits after a sharp run up in the main index this year.

 "There are only two more months to go for foreign funds to
close their books and they will start to book profits now,"
said Arun Kejriwal, director at research firm KRIS.

 "Valuations, which earlier looked attractive, are starting
to look expensive now," he said.

 By 11:49 a.m. (0619 GMT), the 30-share BSE Index .BSESN
was trading down 1.04 percent, or 176.29 points at 16,690.12,
with 22 of its components losing.

 The benchmark has risen 75 percent so far this year and has
more than doubled since hit a 2009 low in March.

 The rally was powered by foreign funds who have bought a
net $12.7 billion of stocks so far this year after dumping more
than $13 billion in 2008.

 Kejriwal said there was also uncertainty about an economic
recovery being sustained.

 Shares in Bharti, which last week called off talks for an
alliance with South Africa's MTN (MTNJ.J), were trading down
12.1 percent at 351.85 rupees, on concern about long-term
outlook.

 Reliance Communications, the No. 2 mobile operator, on
Monday reduced call charges across networks to a flat 50 paise
(1 U.S. cent) per minute, heating up the tariff war in a market
that is getting increasingly competitive.

 Its move came after an almost similar tariff cut by Bharti
Airtel last month and analysts said other operators may have to
match it, clouding earnings growth prospects.

 "Any carpet reaction by the incumbents (to the Reliance
Communications move) remains a risk for sector earnings,"
Citigroup analysts wrote in a research note.

 Reliance Communications dropped 11.6 percent to 265.40
rupees.

 The telecom regulator plans to ask operators to bill
customers on a per-second basis from the current per-minute
billing, the local media reported on Tuesday, a move that could
hit revenues of companies. [ID:nDEL55860]

 "The policies that are coming may be good for the
consumers, but are bad for operators. Competition will only
intensify further," said V.K. Sharma, head of research at
Anagram Stock Broking.

 Other major losers were Reliance Industries (RELI.BO) that
fell 0.7 percent to 2,121.95 rupees and engineering and
construction firm Larsen & Toubro (LART.BO) down 1.2 percent at
1,635 rupees.

 Outsourcer Infosys Technologies (INFY.BO), which will
announce its quarterly results on Friday, was trading up 0.3
percent at 2,326 rupees, while defensive stock ITC Ltd (ITC.BO)
was up 2.1 percent at 243.45 rupees.

 In the broader market losers outpaced gainers 1,923 to 579
on moderate volume of 189 million shares.

 The 50-share NSE index  was down 1.35 percent at
4,935.85.

 STOCKS ON THE MOVE

 * Madhucon Projects (MAPR.BO) was up 2.2 percent at 257
rupees after its joint venture got a $3.9 million road project
from the Nepal government. Its shares had risen as much as 9.4
percent earlier.

 * Lupin Ltd (LUPN.BO) was up 4.3 percent at 1,220.50 rupees
after the drug maker received an upfront payment of $5 million
for giving exclusive U.S. rights to Salix Pharmaceuticals
(SLXP.O) for its drug delivery technology for use with diarrhea
treatment rifaximin.

 MAIN TOP 3 BY VOLUME

 * Bharti Airtel on 7.2 million shares

 * Ispat Industries (ISPT.BO) on 7.1 million shares

 * Reliance Communications on 7.1 million shares

FACTORS TO WATCH
 * For technical analysis double click on www.reutersindia.net
 * India rupee report                                   
[INR/]
 * India bond report                                     
[IN/]
 * Dollar falls on Gulf Oil report, RBA rate hike       
[FRX/]
 * Oil flat at $70, eyes U.S. stocks, dollar switch talk 
[O/R]
 * Dollar skids on Gulf oil report; stocks up      
[MKTS/GLOB]
 * Wall St rises on service data,earnings optimism        
[.N]
 * For closing rates of Indian ADRs                    
INADR
 (Reporting by Janaki Krishnan; Editing by Ranjit Gangadharan)