Sensex set for best gain in three months on better monsoon forecast

REUTERS - Indian shares jumped on Wednesday and were poised for their best gain in nearly three months, as companies with big rural sales such as Hindustan Unilever rose after the country's only private weather forecaster raised the outlook for the 2016 monsoon.

Monsoon rains are expected to be 109 percent above the long-term average, compared with its earlier estimate of 105 percent, Skymet said on Tuesday, adding that the June monsoon rains were seen at 87 percent of long-period average.

Above-average monsoon plays a key role in boosting demand for an array of consumer goods, as 70 percent of India's 1.3 billion people live in villages.

Global market sentiment was upbeat as investors cheered strong U.S. new home sales data for April, which supported the view the economy may be strong enough for the Fed to raise interest rates as early as June.

"Global cues are definitely supporting and on top of that Skymet came out with the market commentary and raised its monsoon forecast, which is adding to the positive sentiment," said Vivek Mahajan, head of research, Aditya Birla Money.

The broader NSE Nifty was 2.3 percent higher at 7,926.05 as of 0912 GMT, while the benchmark BSE Sensex was up 2.16 percent at 25,851.

Both the indexes were headed for their best percentage gain since March 1.

Agriculture-related stocks jumped on better monsoon expectations. Jain Irrigation Systems rose 1.5 percent, while Insecticides (India) Ltd gained 2 percent.

Hopes of revival in rural demand also boosted consumer goods firm Hindustan Unilever and two-wheeler maker Hero MotoCorp , which gained 2 percent and 1 percent respectively.

Tech Mahindra jumped 8.5 percent after the software services provider on Tuesday posted a 90 percent surge in consolidated March-quarter profit, beating analysts' estimates, aided by higher other income and lower taxes.

Tata Power Co Ltd rose 1.7 percent, gaining for the second straight session after the company on Monday posted stellar fourth-quarter results.

However, Cipla declined 5.7 percent after India's fifth-largest drugmaker by sales on Tuesday reported a 69 percent fall in its quarterly profit, well below analysts' forecasts.

(Reporting by Aastha Agnihotri in Bengaluru; Editing by Sherry Jacob-Phillips)