Sensex rises on SBI results; ITC up ahead of earnings

MUMBAI (Reuters) - India's stock markets rose about 0.5 percent to a four-week high on Friday after State Bank of India reported a lower-than-expected bad loan ratio and a sharp increase in profits, raising optimism about the banking sector.

Shares of SBI gained as much as 5.1 percent after India's largest lender by assets said net profit rose a better-than-expected 23 percent to 37.42 billion rupees ($589.1 million) for the January-March quarter.

It also said the gross bad loans ratio stood at 4.25 percent in the March quarter, compared with 4.9 percent in the December quarter.

SBI results bolstered sentiment on a day in which indexes were already gaining after the S&P 500 closed at a record high on Thursday after data on weekly employment, home resales and manufacturing bolstered expectations a U.S. interest rate hike would come only later in the year.

"Expectation are that sign of reduction in non-performing numbers will give a sentiment boost to the entire banking sector," Daljeet S Kohli, Head of Research at IndiaNivesh Securities said.

"Recent data has also corroborated market expectations that there will be no Fed rate hike in June, that gives some short-term comfort to investors," Kohli said.

The BSE Sensex was up 0.61 percent at 27,976.16 after earlier rising to as much as 28,071.16, its highest since April 23. The benchmark index was up 2.4 percent for the week, marking a third consecutive weekly gain and its best performance since the week ended April 3.

Meanwhile, the Nifty rose 0.46 percent to 8,457.20 after earlier rising to as much as 8,489.55. The index was up 2.4 percent for the week.

Other state-run banks were among the leading gainers, with Punjab National Bank Ltd up 1.7 percent and Bank of Baroda up 1.8 percent.

Among other gainers, shares in ITC Ltd rose 1.1 percent ahead if its results due later in the day. The cigarette maker is expected to post a 10.6 percent increase in net profit from a year earlier, according to Thomson Reuters StarMine.

(Reporting by Himank Sharma; Editing by Anand Basu)