BSE Sensex ends at near five-week high on FII buying

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex rose for a fourth straight session on Wednesday to close at its highest in more than a month as blue chips such as ITC Ltd rose on heavy buying by foreign investors despite expectations of volatility due to derivatives expiry.

Overseas investors have been net buyers of cash shares in each of the previous nine sessions, with inflows totalling $533.2 million, exchange and regulatory data showed, calming worries about the U.S. Federal Reserve's stimulus tapering and a slowdown in China.

Also boosting sentiment was foreign buying of index futures and options on Tuesday, worth 21.51 billion rupees, a rare event one day ahead of the expiry of derivative contracts.

Financial markets in India will remain closed on Thursday for a local holiday.

Traders will continue to monitor moves in other regional markets for near-term direction, ahead of December-quarter economic growth data due to be released after market close on Friday.

"FIIs flows are driving the market and may even overshadow GDP data. We are positive about the market for the month of March and are seeing a pre-election rally taking shape," said Vinod Nair, head of fundamental research at Geojit BNP Paribas Financial Services.

India's economic growth likely slowed to a near decade-low of 4.9 percent at the end of last year as high interest rates hit factory activity, according to economists polled by Reuters who don't expect a pickup in investment before elections in May.

The benchmark BSE Sensex rose 0.65 percent, or 134.52 points, to end at 20,986.99.

The broader Nifty rose 0.62 percent, or 38.75 points, to end at 6,238.80. It closed above the psychologically important 6,200 level for the second day.

Both the indexes marked their highest close since January 24 for a third consecutive day.

India's National Stock Exchange on Wednesday launched trading of futures tied to its VIX volatility index <.NIFVIX>, known as the "fear gauge," providing a key hedging tool against uncertainty ahead of general elections and weaker global market sentiment.

Trading was active with 3.25 billion rupees worth of turnover, the NSE website showed.

India's regional parties met on Tuesday to declare a political alternative to the two main national parties, the ruling Congress and the main opposition BJP, ahead of national elections due by May.

Cigarette-maker ITC Ltd rose 2.1 percent, while Sun Pharmaceutical Industries Ltd gained 1.5 percent.

Among other blue chip stocks, HDFC Bank rose 0.9 percent, while Mahindra and Mahindra Ltd ended 2.2 percent higher.

The NSE software index <.CNXIT> ended 0.37 percent higher after earlier marking its all-time high at 10,212.60, rising for a second straight day on continued optimism about U.S. business outlook.

Wipro Ltd gained 1.1 percent, while Infosys Ltd rose 0.7 percent.

Dr. Reddy's Laboratories Ltd rose 2.3 percent after earlier marking its record high of 2,849.40 rupees on growing hopes about its U.S. business. The drugmaker also said late on Tuesday it launched Sumatriptan injection, used to treat migraine, for U.S. markets.

However, L&T Finance Holdings fell 2.8 percent on profit-taking after gaining 3.9 percent on Tuesday on expectations it was a leading contender for a banking licence.

(Editing by Prateek Chatterjee)