BSE Sensex snaps 3-day fall; L&T rallies after result

People walk pass the Bombay Stock Exchange (BSE) building displaying India's benchmark share index on its facade, in Mumbai July 31, 2009.

BANGALORE (Reuters) - The BSE Sensex snapped a three-day fall on Thursday and rose 0.3 percent tracking firm global markets, but investors continued to fret over the impact of rising borrowing costs on corporate earnings.

Larsen & Toubro led the gains adding 5.8 percent after the engineering and construction conglomerate beat market estimates with a 17 percent rise in quarterly profit, and forecast revenue to grow a quarter in 2011/12.

The 30-share BSE index ended up 0.31 percent, or 55.20 points, at 18,141.40, a day after slipping to its lowest close in nearly two months.

The gains lacked conviction and the market had at one point dropped as much as 0.2 percent. Seventeen index components closed down.

"Large investors are not participating right now. It is the smaller guys who are in the market," said Gajendra Nagpal, chief executive of Unicon Financial.

Arun Kejriwal, director of research firm KRIS, said the gains were mainly due to the rise in Asia and Europe and the outlook remained subdued.

"Inflation is a big concern. We are sitting on possible price hikes in fuel, which will add to inflation. This will in turn see the Reserve Bank of India (RBI) tinkering interest rates," he said.

Those worries have seen foreign funds pulling out about $1.6 billion during May 1-16.

The RBI had raised rates by a higher-than-expected 50 basis points earlier this month and warned inflation would remain around March levels in the first half of the fiscal year.

Headline inflation in April was at an annual 8.66 percent, data on Monday showed, and the prospect of rising energy costs is likely to keep pressure on the RBI to raise rates again when it reviews policy on June 16.

Data released on Thursday showed the fuel price index in the week ended May 7 rose 12.11 percent from a year earlier.

State-run refiners had raised prices of petrol by 8.6 percent on the weekend. The government also aims to raise state-controlled prices of fuels such as diesel and cooking gas, possibly as soon as this week, according to sources.

Energy major Reliance Industries, which has the heaviest weight on the benchmark index, rose 1.5 percent to 915.50 rupees after UBS upgraded the stock to buy from neutral, citing attractive valuations compared to Asian peers.

The stock has fallen almost 13.5 percent this year, mainly on concerns over decline in gas output from its blocks off India's east coast.

Beaten down auto stocks pulled back and the sector index sector index rose 0.2 percent. Top truck maker Tata Motors rose 0.15 percent and utility vehicles maker

Mahindra and Mahindra gained 0.9 percent.

Amongst the main losers were top-listed realtor DLF and utility Tata Power, dropping 3.6 percent and 2.8 percent respectively.

State Bank of India continued its losing run after disappointing results and closed down 1.4 percent at 2,322.30 rupees.

The bank, the country's largest lender, has dropped more than 11 percent after posting an unexpected slump in March quarter profit on Tuesday due to higher provisioning and operating costs.

The 50-share NSE index closed 0.14 percent up at 5,428.10 points. In the broader market, 928 losers were ahead of 469 gainers. Volume was 420 million shares, the lowest in at least a month.

STOCKS THAT MOVED

* Lakshmi Vilas Bank rose 5.5 percent to 109.20 rupees after the bank reported a profit of 273.8 million rupees in the quarter ended March from a loss in the year-ago quarter.

* Saint Gobain Sekurit India Ltd ended down 3.1 percent at 39.45 rupees, after scaling a 12-month high of 42.25 rupees. On Wednesday, the automotive glass maker said its founders had proposed to delist the company from the Bombay Stock Exchange and plan to buy 14.23 percent stake at an offer price of not more than 31 rupees per share.

* Orchid Chemicals dropped 4.3 percent to 282.15 rupees after its board approved raising 10 billion rupees for redemption of outstanding foreign currency convertible bonds due in February 2012 and other business purposes.

MAIN TOP THREE BY VOLUME ON NSE

* Ashok Leyland on 14.6 million shares

* Unitech India on 14.6 million shares

* Coal India on 11.4 million shares

(Editing by Ranjit Gangadharan)