BSE Sensex posts best weekly gain since July 2009

People watch a large screen displaying India's benchmark share index on the facade of the Bombay Stock Exchange (BSE) building in Mumbai January 24, 2008.

MUMBAI (Reuters) – The BSE Sensex posted its best weekly gain in 20 months and rose 2.5 percent to a two-month closing high on Friday , as investors picked up bargains from battered down stocks ahead of the quarter-end .

Software companies jumped after strong quarterly results and forecasts from global technology majors Oracle Corp and Accenture indicated a positive business environment for Indian IT companies.

"The numbers and forecasts from these companies, reinforce the fact that the business environment for Indian IT companies is good," said Dipen Shah, senior vice-president of research for private client group at Kotak Securities. The IT sector index firmed 4 percent.

The 30-share BSE index posted its best daily gain in a month and jumped 2.53 percent, or 464.90 points, at 18,815.64, its highest close since Jan. 25. All of its components closed in the green.

It gained 5.2 percent for the week, its best weekly gain since July 2009.

Market breadth was in favour of advancing shares and they beat declining ones in the ratio of 1.4 to 1. Around 336 million shares changed hands on the BSE, sharply higher than the 30-day daily average volume of 275 million shares.

"There is more money available to chase risk," said Sanjeev Patkar, director of research at Almondz Global.

"And when an asset (Indian equities) which has proven itself earlier, is now available at a reasonable price, people will obviously come and buy it."

The benchmark index is down 8.3 percent year-to-date as foreign funds withdrew around $1.8 billion.

It has under performed world equities sharply, and is one the worst performing major markets in 2011.

The index could recoup recent losses but will still end 2011 where it began, as inflation concerns could yet dampen investor appetite in an otherwise fast-growing economy, a Reuters poll found.

The poll of investment banks and brokerage firms, taken over the past week, sees the Sensex at 18,550 at end-June and at 20,500 at the end of the year -- not far from 2010's 20,509 close.

Top outsourcer Tata Consultancy Services firmed 2.3 percent on Friday. On Thursday, it had said it had received a contract to provide banking software technology solution to Shanghai Rural Commercial Bank.

Smaller rivals Infosys Technologies and Wipro gained 5.2 percent and 3.7 percent, respectively.

Financials led the charge on optimism that India's economic growth story will stay intact.

Top lender State Bank of India gained 2.2 percent, while leading private lenders ICICI Bank and HDFC Bank rose 3.6 percent and 3.2 percent, respectively.

Top-listed real estate firm DLF climbed 6.2 percent, as investors picked the stock after the under performance this year. The stock is still down nearly 15 percent year-to-date.

The 50-share NSE index gained 2.4 percent to 5,654.25.

World stocks held firm, focusing on a buoyant economic and company backdrop. The

MSCI All-Country index was up 0.2 percent by 1028 GMT.

STOCKS THAT MOVED

* Aban Offshore, which provides services to the oil sector, rose 2.9 percent at 617.20 rupees after BNP Paribas raised the stock to "buy" from "reduce" and raised the price target to 689 rupees from 664.

* Natco Pharma firmed 2.7 percent to 262.35 rupees on a report in the Business Line newspaper that the drugmaker may sell off its pharmacy chain SaveMart run in at least three states in the United States.

Chief Financial Officer Bhaskara Narayana told Reuters: "We have sold two (pharmacy) stores and only one store is left and whenever we get a good opportunity, we want to exit."

MAIN TOP THREE BY VOLUME ON BSE

* Unitech on 8.9 million shares

* Acropetal on 5.3 million shares

* Lovable on 5.1 million shares

(Additional reporting Kaustubh Kulkarni; Editing by Aradhana Aravindan)