Sensex, Nifty snap three-day fall after S&P raises India outlook to 'stable'

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex and Nifty rose on Friday to snap a three-day losing streak as rate-sensitive stocks such as IDFC Ltd jumped after Standard and Poor's raised India's sovereign credit outlook to "stable" from "negative".

The S&P said the government mandate and improved political setting offered a conducive environment for reforms in Asia's third largest economy. It cited India's external position and improving current account balance among other positive factors.

S&P added it could raise India's rating should the country revert back to a real per capita gross domestic product of 5.5 percent per year, and if its fiscal, external and inflation metrics improve.

However, the benchmark indexes marked their first weekly fall in seven due to concerns over the Supreme Court's scrapping of most coal block allocations since 1993, the government delaying a hike in gas prices and foreign investors selling in each of the last three sessions.

"S&P underlines government's efforts in stoking the economy but Modi needs to continue the reform cycle without any lag," said U.R. Bhat, managing director at Dalton Capital, a unit of U.K.-based Dalton Strategic Partnership LLP that has nearly $2 billion of assets.

The benchmark BSE Sensex rose 0.6 percent, or 157.96 points, to end at 26,626.32, while falling 1.7 percent for the week.

The broader Nifty rose 0.72 percent, or 57 points, to end at 7,968.85, marking a weekly fall of 1.9 percent.

Both the indexes marked their biggest weekly declines since Aug.1.

The gains were led by rate-sensitive stocks. The NSE Bank index rose 2 percent, marking its biggest daily gain since Aug. 18.

IDFC rose 3 percent, while Axis Bank ended 3.1 percent higher.

Punjab National Bank rose 2.9 percent, while State bank of India gained 2.8 percent.

DLF gained 4.5 percent, Tata Motors advanced 1.3 percent.

Hindalco Industries gained 5.4 percent on value buying after slumping 9.2 percent over the previous four sessions.

Sun Pharmaceutical Industries gained 4.2 percent, marking its biggest single-day gain since Aug. 20 on speculation of lower chances of an import alert for a unit.

However, among stocks that fell, Petronet LNG declined 3.7 percent after Asian Development Bank launched a share sale in the gas supplier to raise up to $120 million.

(Editing by Anand Basu)