Sensex rallies; SBI jumps after bad loans stabilise

MUMBAI (Reuters) - The BSE Sensex and Nifty rose for a fourth consecutive day on Friday, as State Bank of India surged after bad loans rose only slightly in the previous quarter, with sentiment also underpinned by stable consumer inflation data and stronger global markets.

The Nifty was up 1.5 percent for the week, snapping two consecutive weeks of falls, after data this week was revised sharply upwards.

Hopes about the economy were further comforted after data on Thursday showed India's retail inflation stayed well below the central bank's target, bolstering prospects for further interest rate cuts.

Investors are hopeful for faster reforms at the government's 2015/16 fiscal budget due on Feb. 28 after the Prime Minister Narendra Modi-led party was routed in Delhi state elections.

"We are optimistically cautious. If the budget really delivers something, we may see further upside," said Daljeet S Kohli, head of research at investment firm IndiaNivesh.

The Nifty added 0.85 percent to 8,785.85.

The BSE Sensex gained 0.8 percent to 29,036.80. For the week, the index has gained 1.2 percent.

State Bank of India led the gains, adding 6 percent, heading towards its biggest single-day gain since May 23, 2014.

The bank said its bad loans as a percentage of total loans were 4.9 percent for the three months to Dec. 31, compared with 4.89 percent a quarter earlier. Analysts had expected the number to be higher.

Blue chips also gained after the inflation data and as Asian shares soared on news of a ceasefire accord in Ukraine, Sweden's surprise move to cut its main rate into negative territory, and hopes of a resolution between debt-strapped Greece and its creditors.

Tata Consultancy Services gained 2.6 percent while ITC Ltd added 0.9 percent.

Lupin Ltd added 2.9 percent after the Reserve Bank of India increased the foreign investment limit for the drug maker's shares.

(Reporting by Indulal PM; Editing by Anand Basu)