* Lower Asian mkts, monsoon worries weigh on sentiment * Reliance, ONGC slide as oil prices fall * Financials HDFC Bank, ICICI Bank, State Bank slip (Updates to mid-morning) MUMBAI, Aug 21 (Reuters) - Indian shares fell 0.7 percent on Friday, as weaker Asian peers and jitters about the economic impact from weak monsoon rains weighed on investor confidence. Lower commodity prices and mixed U.S. economic data overnight also subdued sentiment. Diversified cigarette maker ITC (ITC.BO) eased 1.6 percent to 221.80 rupees, while engineering and construction firm Larsen & Toubro (LART.BO) dropped 1.7 percent to 1,457.75 rupees, leading losses in the main index. Energy giant Reliance Industries (RELI.BO) fell 1 percent to 1,879 rupees and state-run explorer Oil and Natural Gas Corp (ONGC.BO) slid 0.5 percent to 1,173.25 rupees as oil eased below $73 a barrel. Leading financials State Bank of India (SBI.BO), HDFC Bank (HDBK.BO) and ICICI Bank (ICBK.BO) were among the other major losers. By 11:06 a.m. (0536 GMT), the 30-share BSE index .BSESN was down 0.7 percent at 14,905.61 points, with 22 stocks declining, after falling as much as 1.2 percent earlier. "In the near-term, the Indian stockmarkets would not be able to escape the negative sentimental impact that arises from the likely repercussions that a highly deficient monsoon may have on India's GDP," Angel Broking head of research Hitesh Agrawal said. However, Agrawal said worries below-normal rainfall will have a significant impact on corporate earnings may be overdone and long-term investors may do well to buy stocks on declines. Monsoon rains in India during the past week increased to the highest in a month but the main soybean region saw weak rainfall and reservoirs fill up at a much slower rate than normal, putting at risk power supply and winter irrigation. [ID:nBOM487735] The benchmark had fallen 4.2 percent this month, hurt by worries about the weak monsoon, high valuations and looming inflation. Fears that stocks worldwide have run ahead of fundamentals have risen recently in the wake of a slew of downbeat data from across the world. The number of U.S. workers filing new claims for jobless benefits last week unexpectedly rose, but factory activity in the U.S. mid-Atlantic region turned positive in August as a jump in new orders broke a 10-month streak of contraction. [ID:nN20510281] [ID:nLK703610] Trading could be choppy until clearer signs emerge on the government's efforts to tackle the weak monsoon, but some analysts say ample liquidity flowing into the emerging markets will support stocks in the near term as investors look to buy on dips.Government-run State Bank of India (SBI.BO) slid 1.3 percent to 1,730.05 rupees, while private-sector rival ICICI Bank was down 1.5 percent at 708.40 rupees. HDFC Bank slipped 2 percent to 1,451.80 rupees. In the broader market, gainers led losers 1,169 to 881 on relatively light volume of 91.6 million shares. The 50-share NSE index was down 0.7 percent at 4,424.20. Asian shares were lower, with Japan's Nikkei .N225 down 1.7 percent, while MSCI's measure of other Asian markets .MSCIAPJ fell 1.5 percent.

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