Sensex rises but FII selling overhang continues

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MUMBAI (Reuters) - Indian shares rose for a second consecutive session on Tuesday, heading for their first back-to-back gains so far this month, as investors continued to buy into beaten-down stocks such as ITC Ltd even though sentiment remained broadly cautious.

Gains were also helped as Asian and European stocks rose across the board following a surge on Wall Street overnight as investors clawed back losses that came on the back of last week's Paris attacks.

Still, caution prevailed after disappointing corporate earnings in the July-September quarter, while foreign institutional investors (FIIs) have been net sellers of $506.37 million worth equities so far this month.

"Global backdrop and sell-side figures from FIIs are creating an overhang on the market," said Gaurang Shah, vice president at Geojit BNP Paribas.

The Nifty was up 0.5 percent after falling as much as 0.17 percent earlier in the day. A second consecutive higher close would mark its first back-to-back gain since a three-session winning streak in October.

The Sensex was 0.6 percent higher, after falling as much as 0.11 percent earlier in the day.

ITC rose 3.3 percent, building on Monday's gain of 2.57 percent. The stock lost 2.34 percent last week.

ICICI Bank rose 0.73 percent after India's biggest private sector lender by assets said it would sell a 6 percent stake in its life insurance joint venture in two separate deals worth a combined $296 million.

But Infosys fell over 2 percent and was the biggest drag on the Nifty after the company warned in a conference call on Monday that it was seeing some margin pressure in the third quarter.

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