Sensex touches seven-month high; weather office keeps monsoon forecast

REUTERS - Indian shares rose to their highest since late October on Friday and were headed for their second consecutive weekly gain after the country's weather office maintained its above-normal monsoon forecast for the year, lifting firms dependant on rural demand.

The June-September monsoon rains would be 106 percent of the long-term average, the chief of the Indian weather office said on Thursday.

Stronger rains could cool down food prices, raising the prospect that the Reserve Bank of India would be more willing to cut interest rates again later this year.

For now, the RBI is widely expected to keep the repo rate at a five-year low of 6.50 percent when it holds its policy review on Tuesday, after cutting it by 150 basis points since early last year.

"Expectations of a good monsoon have once again reinforced the confidence among market participants that the growth may come back on a good note, considering the consumerism in the rural side of the economy," said Saurabh Jain, assistant vice president-research at SMC Global Securities.

The broader NSE Nifty was up 0.36 percent at 8,248.65 as of 0750 GMT, after rising as much as 0.52 percent to its strongest since Oct. 26 earlier in the day. For the week, the index has added 1.12 percent.

The benchmark BSE Sensex rose 0.36 percent to 26,939.78, on track for a weekly gain of 1.1 percent.

Shares of companies dependent on agriculture rose as hopes of a better monsoon increased expectations of a revival in rural demand.

Insecticides (India) Ltd rose 2.18 percent, while Monsanto India Ltd was up 3.07 percent.

Hindustan Unilever Ltd rose 1.82 percent.

Two-wheeler makers Hero MotoCorp Ltd , Bajaj Auto Ltd , and TVS Motor Co Ltd rose between 1.70 percent and 2.50 percent.

Among losers, Idea Cellular Ltd plunged as much as 12.1 percent after a report that private equity firm Providence Equity Partners was selling a 3.5 percent stake in the wireless provider.

(Reporting by Darshana Sankararaman in Bengaluru; Editing by Subhranshu Sahu)