Indian shares defied firm world markets to trade flat to lower on Thursday as crude oil bounced back, stoking investor fears of higher inflation.

At 11:02 a.m. (0532 GMT) India's benchmark 30-share BSE index was 0.04 percent down at 12,362.57 points, after climbing to a new 4-½ month high in the previous session.

The index has been closing in on a May peak of 12,671.11 points in the past three sessions, but is still 2.4 percent below the all time high.

Crude oil has spoiled our party, said V.K. Sharma, head of research at Anagram Stock Broking Ltd. Keep the champagne bottle on the ice and hold on to the invitations ... I see the market weakening further.

India imports 70 percent of its crude oil requirements and higher prices would fuel higher inflation in Asia's fourth-largest economy, which is growing by 8 percent a year.

Shares in state-run explorer Oil and Natural Gas Corp. Ltd. rose 0.7 percent to 1,192.95 rupees as crude prices gathered momentum.

U.S. crude bounced back and rose to a seven-day high of above $63 a barrel as traders waited to see if OPEC looked likely to cut output to counter swelling inventories in the U.S.

Index heavyweight Reliance Industries Ltd. eased 0.8 percent to 1,166 rupees after its owners said they had increased their stake in the top private firm by 2 percent to more than 50 percent.

India's number one private bank ICICI Bank Ltd. gained 1.4 percent to 698 rupees, while mortgage firm Housing Development and Finance Corp. rose 1.7 percent to 1,471 rupees.

In the broader market 971 stocks advanced over 856 decliners in a volume of nearly 50 million shares.

The 50-issue Nifty was down 0.19 percent to 3,572.55.

Elsewhere, Karachi's 100-share index rose 1.3 percent to 10,520.62 points, while Colombo's All-Share index was also up 1.23 percent at 2,364.49 points.

STOCKS ON THE MOVE

* Indian Oil Corp. lost 1.5 percent to 518.50 rupees after a senior official said the state-run firm had shelved plans to buy Maurel & Prom because the French company was asking too high a price.

* State-run refiners fell between 1-3 percent after oil prices jumped to a seven-day high. Bharat Petroleum Corp. Ltd. and Hindustan Petroleum Corp. Ltd. lost 1.6 percent each to 369 rupees and 289 rupees respectively.

* KLG Systel Ltd. rose by its daily limit of 5 percent to 211.70 rupees after it won orders worth 240 million rupees from electricity utilities in Punjab and Rajasthan to reconfigure feeders used in electricity transmission.

TOP 3 BY VOLUME:

* Action Construction Equipment Ltd. on trade of 2.5 million shares.

* Pondy Oxides and Chemicals Ltd. on 1.9 million shares.

* Sterling Biotech Ltd. on 1.7 million shares.

India Crude oil