By Simon Kennedy

LONDON (Dow Jones)--Shares of banks and miners lost ground Monday, cementing a losing session after gains that produced a 3% rise for London's top index last week.

Royal Bank of Scotland (RBS) was one of the biggest fallers, losing 5.2% after media reports that the bank may raise as much as 4 billion pounds ($6.5 billion) from shareholders.

The money would help to limit the overall increase in the government's stake, but RBS would remain committed to the government's asset protection scheme, which will insure up to 300 billion pounds of risky assets.

Shares in Lloyds Banking Group (LYG), which last week said it was looking at reducing or canceling its participation in the program, fell 2.8%. Among other banks, Standard Chartered lost 1.5% and HSBC Holdings (HBC) dropped 1.2%.

The benchmark FTSE 100 index dropped 38.53 points, or 0.7%, to close at 5,134.36 as other major European indexes also declined.

Analysts at Charles Stanley said the rise by U.K. stocks in recent weeks "is pushing them to levels where they are certainly no longer cheap and, on a technical view at least, it is not difficult to find reasons to be cautious."

The broker said the gap between the FTSE 100's current level and the 40-week moving average price is nearly 20% -- a reading that hasn't occurred in the last 20 years.

What's more, the 14-day relative strength index -- a ratio of the total magnitude of gains to losses -- has reached levels last seen in early 2005, suggesting that prices "have become extremely overbought," the firm said in a note to clients.

Mining stocks fell as Kazakhmys lost 3.3%. Vedanta dropped 3.5% and Rio Tinto (RTP) lost 3.4%.

Kazakhmys was downgraded by Citi and Vedanta was downgraded by Goldman Sachs.

BHP Billiton (BHP), down 2.7%, was also in focus after a report in The Wall Street Journal that it has built up around $18 billion in cash during the last year and expects to use some of it, along with additional borrowings, to acquire large rivals.

In other broker action, shares in broadcaster ITV dropped 3.7% after it was downgraded to neutral from overweight at J.P. Morgan.

The broker estimated that for the stock to have significant further upside potential, advertising revenue would need to grow more than 6% in 2010 and 2011, which it said would be "very optimistic." There also were reports that talks with prospective chief executive Tony Ball were faltering.

Among relatively few gainers on the main index, drug giant AstraZeneca (AZN) stepped higher -- gaining 0.7%. The firm agreed a deal to license investigational products from Nektar Therapeutics (NKTR), which could lead to payments of up to $1.5 billion to Nektar if all regulatory and sales milestones were to be reached.

Other drug stocks were also higher, with GlaxoSmithKline (GSK) rising 0.7% and Shire PLC up 0.3%.

Marks & Spencer rose 1.6% after Societe Generale lifted its price target on the retailer to 500 pence from 445 pence and also raised its earnings forecast, citing soft two-year comparisons in the key Christmas quarter and improving U.K. consumer confidence.

Services Desk; Dow Jones Newswires; +44-20-7842-9319/9274