Sensex edges up, but valuation worries persist

(Reuters) - Indian shares edged up on Thursday after posting their worst fall in nearly seven weeks in the previous session, as continued heavy buying by foreign investors helped lift blue chips such as ITC Ltd even though overall sentiment remained cautious.

Asian shares reversed recent gains following a drop in oil prices on a surprising jump in U.S. government stockpiles and record Saudi Arabian production.

Meanwhile, April-June earnings have mostly missed consensus estimates, but foreign investors have remained strong buyers, with Tuesday marking their 23rd consecutive session of purchases, bringing the total net investments in the year to $5.25 billion.

"Obviously there are valuation worries, but there is a lot of liquidity which is keeping the market afloat," said Daljeet Kohli, director and head of research at IndiaNivesh Securities.

Broader earnings have mostly missed estimates, so the full-year target has to come down, he added.

The broader NSE Nifty <.NSEI> was up 0.12 percent at 8,585.50 as of 0600 GMT, after falling as much as 0.3 percent earlier in the session.

The benchmark BSE Sensex <.BSESN> was 0.13 percent higher at 27,811.41.

Shares of cigarette maker ITC Ltd rose 1.9 percent after falling 2.4 percent in the last three sessions, while Reliance Industries gained 1.8 percent after declining 2.6 percent on Wednesday.

Jaiprakash Associates Ltd and UltraTech Cement rose as much as 6.8 percent and 1.5 percent respectively, after the country's anti-trust regulator on Wednesday approved UltraTech's deal to buy Jaypee Group's cement business.

Infrastructure firm Dilip Buildcon jumped 13 percent on its market debut. The stock rose as much as 16 percent over its IPO price of 219 rupees.

But Bank of Baroda fell 8.6 percent after the country's second-biggest bank by assets on Thursday posted a 60 percent plunge in its June-quarter profit due to a surge in provisions.

(Reporting by Aastha Agnihotri in Bengaluru; Editing by Subhranshu Sahu)