Sensex, Nifty extend gains on crude rally; correction seen ahead

REUTERS - Indian shares rose 1 percent on Friday and were headed for their second session of gains, led by energy stocks including Reliance Industries Ltd as oil prices extended their rally.

Asian shares inched up while Wall Street closed at record highs overnight, after the Saudi oil minister's comments about possible action to stabilise oil prices sent crude up.

Sentiment also got a boost as foreign investors continued to buy Indian shares for a 24th consecutive session as of Wednesday, bringing the total net investments in the year to $5.33 billion.

But analysts warned of a correction in the coming days as a set of weak June-quarter earnings stoked valuation worries.

"It's a pure liquidity-driven rally, with foreign flows being the only catalyst now," said Sanjeev Bhasin, executive vice president - markets at India Infoline.

"Valuations are looking very frothy and stretched, so correction will happen soon and that is what we think the second half of August will play out."

The Sensex was 0.86 percent higher at 28,099.02 as of 0650 GMT, up 0.09 percent for the week.

The Nifty was up 0.64 percent at 8,647.50, almost flat for the week.

Indian markets will be closed on Monday for a local holiday.

The Nifty Energy Index rose about 1 percent, with Reliance Industries and Cairn India gaining 1.9 percent and 2.9 percent, respectively. Both stocks were headed for their second straight session of gains.

JK Lakshmi Cement rose 1 percent after the company swung to a quarterly profit, boosted by an increase in cement prices in its key north India market.

Garment maker SP Apparels rose 2.6 percent over its IPO price of 268 rupees on its market debut. Analysts said it is the only listed company in India that caters to the niche segment of children's wear.

But Aditya Birla Nuvo fell 16.5 percent after its parent group said it planned to merge the unit with subsidiary Grasim Industries.

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