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MARKET EYE-Indian banks shares drop; risks remain, UBS says

* Shares in Indian banks hit by heavy profit-taking after recentfiscal and economic reforms had sparking a rally in the sectorby raising the raised the prospect of potential RBI rate cuts.* The government last week also announced proposals to allowmore FDI into the insurance sector and to open up the pensionsector for overseas investments, although both measures wouldneed to be approved by parliament.

* However, UBS warns implementation risks for the governmentreforms remain high, while noting Indian banks are still facingchallenges such as inflation, high leverage by companies, andnon-performing loans in a noted dated on Friday.* State Bank of India

shares fall 3 percent aftersurging 21.5 percent from the start of September to Friday'sclose.* ICICI Bankfalls 1.3 percent.

(manoj.dharra@thomsonreuters.com)

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