By Sethuraman N R

Indian shares edged lower on Thursday, after retail inflation breached the Reserve Bank of India's (RBI) medium-term target of 4% for the first time in 15 months, while lenders fretted about a possible insolvency of Vodafone Idea .

Annual retail inflation  rose to 4.62% last month on higher food prices, but most economists expect the central bank to look past the inflation print and cut rates for a sixth straight time next month.

Higher inflation and reports of a liquidation of Vodafone Idea were pulling down the markets, said Sumit Pokharna, vice president, Kotak Securities.

"If Vodafone Idea goes for a toss, then the pain will come to the banks. Again, the next leg of non-performing assets will start. Even private banks have exposure to Vodafone Idea," he said.

Aditya Birla Group will not infuse fresh equity into its venture with Vodafone  and let it opt for insolvency if the government does not provide substantial relief, the Economic Times reported, quoting senior executives.

Vodafone Idea shares slumped as much as 23% to a record low in early trade.

Earlier this week, Vodafone  said its future in India could be in doubt unless the government stopped hitting operators with higher taxes and charges, after a court judgment over licence fees resulted in a 1.9 billion euro group loss in its first half.

The NSE Nifty 50 index  was down 0.3% at 11,806.65 as of 0413 GMT, while the S&P BSE Sensex  was 0.15% lower at 40,051.12.

The Nifty bank index , the public sector undertaking index  and the private bank index  were the top losers, down by 0.6% to 2.3%. All indexes except the Nifty information technology were in the red.

Bharti Infratel  fell 8.7% and was the top loser in the Nifty 50, while Bharti Airtel <BRTI.NS> fell 3.5% ahead of quarterly results due later in the day.

(Reporting by Nallur Sethuraman in Bengaluru; Editing by Subhranshu Sahu)