Sensex heads towards highest close in three months

MUMBAI (Reuters) - The BSE Sensex and Nifty rose on Thursday, heading towards their highest close in three months, led by gains in financial and energy stocks on hopes that a fall in oil prices due to the Iran nuclear deal will lower import costs and interest rates.

Oil prices rose on Thursday, but the U.S. and Brent prices are down more than 17 and 15 percent respectively from their June peaks on oversupply, even as the market expects a gradual return of Iranian exports from 2016 to further reduce prices.

Investors also look towards the monsoon session of parliament next week where key proposals including land acquisition and national tax reforms are expected to be debated.

Next week's parliament session is expected to be volatile, with political scandals likely to disrupt proceedings and put land, labour and tax reform bills on the back burner.

Gains also tracked higher Asian shares after volatile Chinese stocks reversed course and rose, while the dollar stood tall after Federal Reserve Chair Janet Yellen reinforced expectations for a U.S. rate hike.

"Government is facing rough winds on key land acquisition bill, which is definitely a concern," said Deven Choksey, managing director at K R Choksey Securities.

The BSE Sensex was up 0.51 percent while the Nifty gained 0.52 percent, heading towards their highest close since April 17.

Housing Development Finance Corp gained 1.9 percent.

Banking stocks such as HDFC Bank rose 1.5 percent, while Axis Bank was up 2.8 percent, Kotak Mahindra Bank was up 1.5 percent.

Meanwhile, oil refiners such as Reliance Industries rose 1.24 percent, BPCL gained 1.9 percent. State-run coal miner Coal India rose 0.54 percent.

(Reporting by Karen Rebelo and Abhishek Vishnoi in Mumbai; Editing by Anand Basu)