Sensex edges higher; lenders gain on Moody's upgrade

MUMBAI (Reuters) - The BSE Sensex and Nifty were up on Thursday, rising for the fifth straight session and heading towards the highest close in three weeks, as lenders such as ICICI Bank gained after rating agency Moody's upgraded India's sovereign ratings outlook.

Moody's revised India's sovereign ratings outlook to "positive" from "stable" on Thursday as it expected actions by policymakers to enhance the country's economic strength in the medium term.

A firm trend across the region also helped. Asian stocks rose extending the previous session's gains, while the dollar drew support from minutes of the Federal Reserve's last meeting showing the U.S. central bank was still on course to hike interest rates this year.

"The ratings (outlook) upgrade will give more comfort for foreign investors and also attract more capital. Our fiscal deficit situation is under control and global investors are comfortable with that. The market undercurrent is positive," said Deven Choksey, managing director, KR Choksey Securities.

The benchmark BSE Sensex was up 0.11 percent at 28,740.71, while the broader Nifty gained 0.17 percent to 8,729.30.

Lenders gained with the Bank Nifty adding 1.8 percent after the ratings upgrade. The key banking sub-index is down 7.2 pct since Jan-end on concerns over valuations and expected delay in earnings recovery.

ICICI Bank gained 1.6 percent, State Bank of India added 0.9 percent and HDFC Bank was up 1.3 percent.

Broader gains were however capped as healthcare stocks fell with Sun Pharmaceutical Industries falling 2.7 percent after Bank of America Merrill Lynch (BoFA-ML) downgraded several pharma stocks.

BoFA-ML downgraded Sun Pharma to "underperform" from "buy", while it cut Lupin Ltd amd Cadila Healthcare to "neutral" from "buy". Lupin and Cadila were down 2.9 percent and 1.3 percent, respectively.

(Reporting by Indulal PM; Editing by Biju Dwarakanath)