Sensex recovers from over three-month low, but jittery ahead of Fed

MUMBAI (Reuters) - Indian shares rose on Monday after touching a more than three-month low earlier in the session as lenders such as ICICI Bank recovered from recent losses, but sentiment was muted ahead of the U.S. Federal Reserve meeting later this week.

Investors were also somewhat comforted after data released late on Friday showed industrial output grew a much stronger-than-expected 9.8 percent in October from a year earlier, its fastest pace in five years.

But India's volatility index rose to near a one-month high, showing the widespread caution ahead of the Fed's meeting, with many investors expecting the first U.S. rate hike in nearly a decade.

"There is some comfort coming in from domestic factors. The only concern now is Fed," said G Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm.

The Nifty was 0.36 percent higher after falling as much as 0.78 percent earlier in the day to its lowest level since Sept. 8.

The Sensex gained 0.33 percent after shedding as much as 0.71 percent to its lowest level since Sept. 8 earlier in the session.

Gains were led by a recovery in private sector banks that had fallen sharply on Friday on worries that they might have to recognise higher provisions to deal with bad loans.

ICICI Bank was up 0.3 percent, HDFC Bank rose 0.86 percent, while Kotak Mahindra Bank gained 1 percent.

Meanwhile, Tata Motors fell as much as 4.6 percent, extending its 2.99 percent drop in the previous session after the National Green Tribunal called for a ban on registration of diesel-run vehicles in Delhi to curb air pollution.

Tata Consultancy Services fell as much as 2.3 percent after the company warned floods in Chennai in south India were expected to have a material impact on its revenues.

(Reporting by Karen Rebelo in Mumbai; Editing by Subhranshu Sahu)