Time magazine's chief of correspondents testified today that he continues to have faith in the reliability of reporting by correspondent David Halevy, whose February 1983 dispatch prompted Ariel Sharon's $50 million libel suit.

Completing testimony as a "hostile witness" for the former Israeli defense minister, Richard L. Duncan, supervisor of Time's 90 correspondents in the United States and abroad, said Halevy had been responsible for several Time exclusive reports.

Duncan also said he regarded Halevy as being in the top third of the 15 to 20 Time correspondents who regularly rely on confidential sources for their reports. Asked to name the others, he said he could not immediately recall all of them.

On Monday Duncan admitted to having had concerns in the past about Halevy's work habits and political activities in behalf of one of Sharon's foes. Sharon's lawyers also have questioned Duncan closely about his decision to place Halevy on a one-year probation in 1980 after the magazine ran a "partial retraction" of one of Halevy's dispatches.

Since that incident, Duncan testified, Time has had no problems with the accuracy of Halevy's reports. Indeed, Time editors in New York were impressed, he said, when Halevy was able to amass quickly comprehensive details for such stories as President Jimmy Carter's abortive operation to free U.S. hostages in Iran in April 1980 and the Israeli bombing of Iraq's nuclear reactor in June 1981.

Sharon's associate counsel, Richard Goldstein, noting that then-Israeli Prime Minister Menachem Begin had denounced the article at issue here, asked Duncan if other Time correspondents relying on confidential sources had been similarly attacked by a head of state.

Duncan recalled that Carter had been critical of columns by former Time Washington bureau chief Hugh Sidey.

In questioning Duncan today, Goldstein ranged widely over a number of issues.

The lawyer seemed particularly interested in the fact that Time, in correcting errors, tends to avoid the word "apology," preferring instead to say the magazine "regrets" the inaccuracy.

Duncan said he believed that both words were "in the same ballpark."

Goldstein responded, "Is one in the left field and one in right field?"

Goldstein also dwelled at length on the fact that a Time article published shortly after Israel's June 1982 invasion into Lebanon had not included an assessment by Halevy then that Sharon was a "true statesman."

"On or about June 10, 1982, did you share the view that General Sharon was essentially a true statesman?" Goldstein asked Duncan. Duncan responded that he could not recall.