Sensex, Nifty rise on financials but head for biggest weekly fall since mid-May

By Krishna V Kurup

(Reuters) - Indian shares rose on Friday as the rupee strengthened after crude prices fell sharply overnight and the United States and China looked set to launch a new round of trade talks amid an escalating tariff row.

Investor sentiment was also buoyed after data released late on Wednesday showed retail inflation fell below the Reserve Bank of India's medium-term target in August, increasing the likelihood it will keep interest rates on hold in October. Markets were closed on Thursday for a holiday.

A television news channel reported on Wednesday that exports in August climbed 19.2 percent from a year earlier to $37.84 billion.

"Inflation and export data signalled that the likelihood of a worsening current account deficit has reduced. Inflation was lower than expected despite weakness in the rupee and higher crude oil prices, so the market now thinks there is probably some stability here," said Sunil Sharma, chief investment officer with Sanctum Wealth Management.

"Market is also taking comfort from the fact that the government is working on measures and are focused on what's happening in the economy," he said, referring to reports that the government would review economic situations over the weekend.

The broader NSE Nifty was up 0.8 percent at 11,460.80 as of 0712 GMT, while the benchmark BSE Sensex was 0.6 percent higher at 37,943.16.

Both indexes have declined 1.3 percent so far this week, in what could be their biggest weekly fall since the week ended May 18.

The rupee rose to a one-week high of 71.65 per dollar, after hitting a slew of record lows in the last few sessions.

Financials accounted for nearly a third of gains, with Housing Development Finance Corp Ltd rising 1.8 percent, while Indiabulls Housing Finance Ltd added 5.4 percent, making it the top gainer on the NSE Nifty.

Bandhan Bank Ltd jumped 4.4 percent, its biggest intraday gain in over five weeks, following reports the Kolkata-based private-sector lender backed out of a race to buy PNB Housing Finance Ltd.

State-run Rashtriya Chemicals and Fertilizers Ltd climbed 17.2 percent, its sharpest intraday gain in over 3 years, after the government approved the company's plan to transfer land to the Mumbai Metropolitan Regional Development Authority and the Municipal Corporation of Greater Mumbai.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.2 percent, putting it on track for its best performance in more than two weeks.

Oil on Friday clawed back some of its losses from the previous session, when prices fell the most in a month.

(Reporting by Krishna V Kurup in Bengaluru; Editing by Subhranshu Sahu)