Sensex rises after Fed keeps rates steady

REUTERS - Indian shares rose more than 1 percent on Thursday, tracking a global rally after the U.S. Federal Reserve kept interest rates unchanged, leaving the low-rate environment intact for now that has helped underpin strong gains in emerging markets.

Still, the Fed strongly signalled on Wednesday it could tighten monetary policy by the end of this year as the labour market improved further.

The MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.3 percent, while the Nasdaq Composite closed at a record high.

"India will definitely garner larger share of global inflows and that should be positive for equities in short- and medium- term," said Jay Shankar, chief India economist & director, Religare Capital Markets, referring to the Fed and the BOJ announcements on Wednesday.

The Nifty was up 0.73 percent at 8,840.35 as of 0620 GMT, boosted by banking and auto stocks.

The Sensex was 0.72 percent higher at 28,712.13 after rising as much as 1.28 percent earlier in the session.

The Nifty Bank index gained as much as 2.2 percent, having risen about 17 percent this year as of Wednesday's close. IndusInd Bank, Federal Bank and State Bank of India were among the top percentage gainers.

Shares of Indian Oil Corp rose as much as 1.1 percent and Gail (India) Ltd gained up to 1.76 percent after the companies agreed to buy a combined 49 percent stake in a liquefied natural gas terminal being built in Odisha.

Only 11 stocks on the NSE index fell with software service providers being the main decliners on a stronger rupee. The Nifty IT index fell as much as 0.43 percent with Tech Mahindra being the top percentage loser.

(Reporting by Tanvi Mehta in Bengaluru; Editing by Subhranshu Sahu)