Sensex heads towards highest close in two weeks; pharma leads

MUMBAI (Reuters) - The BSE Sensex and Nifty edged up on Thursday, heading for their highest close in two weeks, led by a rise in pharmaceutical stocks after positive comments from broker CLSA boosted investor sentiment.

CLSA said Indian drugmakers' transition to making complex generics should drive significant growth in the sector. Drugs worth $100 billion, especially biologics, are losing patent protection over the next five years in the United States, the broker added.

Sentiment was also boosted after India's Labour Minister Bandaru Dattatreya said state pension fund could invest more into equities in the next fiscal year starting April by raising the current limit set at 5 percent of total investable assets.

India's state provident fund chief said overall investment in equities could be as high as 70-80 billion rupees this year after including other long term assets.

"Sentiment remains positive as India's macro remains in a sweet spot. Fed rate hike and monsoon are the key triggers to watch going forward," said G. Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm said.

The Sensex was up 0.28 percent and the Nifty rose 0.24 percent heading towards their highest close since July 23.

Gains were however limited amid profit-taking in other blue-chip stocks and lower global shares after strong U.S. data and comments from a Federal Reserve governor fanned expectations of an interest rate hike in September.

Dr.Reddy's Laboratories gained as much as 3.2 pct to mark a record high of 4,326.5 rupees. CLSA said the company's profit could increase to $1 billion by FY20 as it launches new products.

Cadila Healthcare rose 2 pct after CLSA upgraded the stock to "outperform" from "underperform," citing differentiated drug pipeline.

Lupin rose 1.9 percent and Aurobindo Pharma gained 3.4 percent each on rising prospects of their U.S. businesses.

Among other drugmakers, IPCA Laboratories rose 3.4 percent, Strides Arcolab gained 3.3 percent while Astrazeneca Pharma India rose 4.3 pct.

(Reporting by Abhishek Vishnoi; Editing by Anand Basu)