BSE Sensex rises to record high despite hawkish Fed

MUMBAI (Reuters) - The BSE Sensex rose as much as 1 percent to a record high on Thursday as investors bet an improving economy and government reforms would allow the country to better withstand potential rate hikes from the U.S. Federal Reserve.

The BSE Sensex has risen 30.2 percent in U.S. dollar terms so far this year to remain Asia's best performing equity market, helped by optimism tied to the election of Prime Minister Narendra Modi.

The Reserve Bank of India's efforts to contain inflation have also improved confidence. Hopes are now rising that the central bank will be able to ease monetary policy as early as its next meeting in December given a slowdown in consumer price growth.

Thursday's gains contrasted with a 0.5 percent fall in the MSCI Asia-Pacific index, excluding Japan after the Fed ended its massive bond-buying programme as expected, on Wednesday, but laced its economic assessment with a tinge of hawkishness.

"Fed's decision is almost priced in and now each market is on its own merit. India stands out among emerging markets due to the bold and courageous decisions it has taken so far," said Deven Choksey, managing director at KR Choksey Securities.

The 30-share BSE Sensex rose as much as 0.96 percent to its all-time high of 27,358.85, surpassing its previous record high of 27,354.99 hit on Sept.8.

The Nifty gained as much as 0.95 percent to 8,167.20, just 0.16 percent away from its record high hit on Sept.8.

India ended fuel price controls, raised gas prices, proposed opening up of the coal sector and relaxed rules for foreign investment in construction, earlier in October.

Exporters led gainers on the increased Fed optimism about the U.S. economy, with Infosys up 2.5 percent. Rival Tata Consultancy Services Ltd gained 0.8 percent.

Tech Mahindra Ltd rose 4.3 percent after the company's July-September profit rose 7.3 percent to 5.89 billion rupees ($95.8 million).

Among drug makers, Cipla rose 0.8 percent, while Dr.Reddy's Laboratories was up 2.2 percent.

Among builders, Unitech rose 0.8 percent and DLF Ltd gained 0.9 percent after India relaxed rules for foreign investment in construction.

Among domestic oriented stocks, Larsen and Toubro rose 0.7 percent, while HDFC Bank gained 0.4 percent.

(Reporting by Abhishek Vishnoi; Editing by Prateek Chatterjee)