Sensex rises on GST reform hopes; may turn volatile

MUMBAI (Reuters) - Indian shares rose on Thursday, snapping a two-session losing streak, on hopes parliament would consider a key reform on a goods and services tax, but traders also braced for volatility ahead of the expiry of derivatives later in the session.

Hopes for the GST tax were rising as the idea of setting a relatively low rate for a new Indian sales tax seemed to be gaining traction, as politicians of all stripes met to debate what would be the country's biggest tax reform since independence.

The bill has passed the lower house of parliament, but has been blocked in the upper house. Legislators started their winter session on Thursday, which will continue until Dec. 23.

"GST, that's the key reason why the market is holding on and some amount of short covering on the last day of expiry," said Alex Mathews head of research at Geojit BNP Paribas.

The Nifty gained 0.5 percent while the benchmark Sensex was up 0.55 percent. Both indexes were on track to record their highest close since Nov. 9.

But volatility could hit markets ahead of the expiry of November derivatives contracts at the end of the session.

Logistics company Gati gained about 5 percent on hopes of GST being cleared.

Drugmaker Sun Pharmaceutical Industries rose 4.6 percent after the company on Wednesday said its unit would not go ahead with a wind energy project in the United States.

Indian markets were closed on Wednesday for a local holiday.

Shares in National Aluminium Co were up 5 percent after the company on Tuesday said it received $8 million towards an out of court settlement from a U.S. firm.

Hero MotoCorp fell 1.34 percent but recovered to trade 1 percent higher after U.S. private equity firm Bain Capital sold stake in the company.

However, Dr Reddy's Laboratories fell over 8 percent after the U.S. Food and Drug Administration released details of its warning letter issued to the drugmaker earlier in November.

(Reporting by Karen Rebelo in Mumbai; Editing by Anand Basu)