Sensex heads for one-month closing high

MUMBAI (Reuters) - The BSE Sensex rose on Thursday, heading for its highest close in a month, as mortgage lenders such as Housing Development Finance Corp rose on hopes the government's push on housing would aid income.

Prime Minister Narendra Modi earlier in the day launched smart cities, housing for all and urban rejuvenation schemes for Asia's third largest economy.

Also, the south-west monsoon rains have been above normal so far in June, stoking hopes the RBI will cut rates in October than in 2016 as anticipated earlier after delivering three cuts of 25 basis points each in 2015 so far.

Reserve Bank of India Governor Raghuram Rajan told newspaper Economic Times the progress of the monsoon thus far has been "quite strong", raising hopes of further interest rate cuts.

"Amid expected fall in wholesale rates, the housing push is a boon for economy and such lenders," said Deven Choksey, managing director at K R Choksey Securities.

The Sensex gained 0.5 percent, heading for its highest close since May 22, while the Nifty rose 0.38 percent.

Both the indexes are also heading for their ninth session of gains in ten.

Stocks also got support after the labour minister said the state social security fund would start investing in equity markets next month, as part of a reform drive aimed at boosting the economy.

Volatility is expected in the second half due to expiry of June equity derivative contracts and as investors fretted over Greece's looming deadline to repay 1.6 billion euros ($1.79 billion) to the International Monetary Fund by Tuesday, threatening to trigger its removal from the euro zone.

Housing sector lenders led the gainers, with HDFC rising 1.8 percent while State Bank of India gained 1 percent.

Smaller stocks LIC Housing Finance rose 0.8 percent, while Indiabulls Housing Finance was up 0.5 percent.

Among other lenders, Axis Bank rose 0.5 percent and IndusInd Bank advanced 1.3 percent.

(Reporting by Abhishek Vishnoi; Editing by Biju Dwarakanath)