* BSE index falls 3.76 pct over week * Govt cuts FY12 growth f'cast to 7.25-7.75 pct * Reliance Inds leads losses, ends 3 pct lower By Kaustubh Kulkarni MUMBAI, Dec 9 (Reuters) - Indian shares extended losses to the second day and closed 1.7 percent lower on Friday as concerns over a slowdown in the economy intensified after the finance ministry cut the country's growth forecast for the current fiscal year. The economy is likely to grow by between 7.25 percent and 7.75 percent in the fiscal year ending March, sharply lower than the original estimate of 9 percent, a mid-year review of the economy tabled by the finance minister in parliament showed. The 30-share BSE index fell 274.78 points to 16,213.46, with 27 of its components in the red. The benchmark fell as much as 2 percent during the day. The index lost 3.76 percent for the week. Shares of index heavyweight Reliance Industries led the losses and fell nearly 3 percent to end at 755.70 rupees, their lowest close since Nov. 25. Nomura downgraded the stock to "neutral" from "buy," citing diminishing exploration and production possibilities, and declining refining margins. "The market has over-reacted to the mid-term review. The lower GDP projections were already known and there is nothing new that you can derive from the review," Kishor Ostwal, chairman and managing director, CNI Research, said. "The market should bounce back next week before the RBI reviews its policy on Friday," Ostwal said, adding he saw 5,100 as next support level for the Nifty. The Reserve Bank of India is widely expected to pause its rate tightening cycle next Friday at its monetary policy review as a slowing economy and a fragile global economic environment take centre stage. Appetite for riskier assets was hit further after India's trade secretary Rahul Khullar said the country was facing a serious balance of trade problem. Private lender ICICI Bank and HDFC Bank fell 1.77 and 2.2 percent, respectively. Brokerage Macquarie said it would continue to be bearish on the Indian banking sector because of deteriorating asset quality and a possible tightening of margins due to an increase in savings rate. A slew of economic data, including industrial output and headline inflation, is expected next week and will influence stock market moves. India's industrial output likely shrank 0.5 percent in October from the same month a year ago, its first decline in over two years, hurt by a slowdown in export growth, a Reuters poll showed. The data is due on Monday. Toughening domestic economic conditions have chipped away demand for vehicles, dragging automakers, while engineering and construction firms have warned of deferred projects and slowing investment spending. Larsen & Toubro, the country's biggest engineering conglomerate, shed 2.65 percent to close at 1,226.85 rupees, after falling as much as 3.33 percent intraday. Shares of Tata Motors, India's third-largest car maker by domestic sales, closed down 2.94 percent at 183.00 rupees. Fellow automaker Mahindra & Mahindra ended down 3.65 percent at 703.25 rupees. The 50-share NSE index fell 1.56 percent to 4,866.70. In the broader market, there were 2.3 losers for each gainer on a moderate volume of 563.6 million shares. Shares were under selling pressure in global markets also, with European stock markets falling on fears EU leaders were struggling to come to terms on immediate measures to halt the slide of euro zone government bond markets. STOCKS THAT MOVED * Kingfisher Airlines fell 3.82 percent after a tax official said the authorities had frozen 11 of the carrier's bank accounts for failure to pay service tax dues. * Geojit BNP Financial Services ended up 6.15 percent after French lender BNP Paribas agreed to pay 405 million rupees to buy out its Indian institutional broking business. * Reliance Capital rose 0.82 percent after the Mint newspaper reported the company was in talks with at least three international firms to sell a 26 percent stake in its general insurance arm. A company spokesman declined to comment on the report. TOP THREE BY VOLUME * Unitech on 23.22 million shares * Jaiprakash Associates on 21.44 million shares * Max India on 19.19 million shares FACTORS TO WATCH * Indian rupee report * Indian bond report * Euro shows muted reaction to summit, risks more selling * Brent falls below $108 on euro zone, China output * Jury out on EU summit as talks continue * U.S. stock index futures signal gains for equities * For closing rates of Indian ADRs

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