Indian shares rebound 0.7 pct; Hindalco down 1.1 pct

* ICICI, HDFC Bank rise more than 2 pct

* Thomas Cook extends gain to end 5.9 percent up

* Bharti Airtel extends fall, ends 1.1 percent lower (Updates to close)

By Nandita Bose

MUMBAI, Feb 9 (Reuters) - Indian shares staged a late rally to close 0.7 percent higher on Thursday despite profit-taking through most of the session, as continued foreign fund inflows boosted investor confidence, with banks and automakers leading the rally.

The country's top aluminium maker Hindalco ended 1.06 percent lower after it reported a 2 percent drop in its December-quarter results. It fell as much as 7.5 percent after its U.S. unit Novelis cut its fiscal-year earnings estimate for the second time. [ID:

The main 30-share BSE index rose 123.43 points to end at 17,830.75, with 21 of its components gaining, after falling as much as 0.55 percent. The main index has risen more than 15 percent in the past five weeks.

"This is a liquidity driven rally," said Gajendra Nagpal, chief executive Unicon Financial Intermediaries.

"There is so much money that has come into the market and the expectation is that there is more money waiting in the sidelines. So we can expect brief corrections but it will not be a meaningful correction," he said. The 14-day Relative Strength Index ended at 73.6, above the 70 mark that indicates stocks are overbought.

Analysts said strong demand from foreign institutional investors and increased investor confidence in a turnaround for the world economy would help stocks in coming sessions.

Foreign funds have invested more than $3.6 billion in local equities so far this year, data from the Securities and Exchange Board of India showed. In 2011, they were net sellers of about $500 million.

Private lenders HDFC Bank and ICICI Bank ended over 2 percent up, while state-run lender State Bank of India ended 0.29 percent higher.

Maruti Suzuki, India's biggest carmaker, ended 0.28 percent higher, while Tata Motors closed up 2.7 percent.

Thomas Cook (India) Ltd ended 5.9 percent up, a day after its UK-based parent Thomas Cook Group Plc said it was looking to sell its stake in the Indian travel operator.

Leading mobile operator Bharti Airtel ended 1.1 percent, extending its 6.5 percent drop in the previous session, as brokerages cut their price targets on the stock after it reported an eighth straight drop in quarterly profit.

State-run Oil & Natural Gas Corp also ended down 0.67 percent, extending its 1.1 percent drop in the previous session, after it posted a 5 percent drop in quarterly net profit, fell short of market expectations.

Energy major Reliance Industries, which has the heaviest weight on the index, ended 0.53 percent lower.

The 50-share NSE index ended up 0.82 percent at 5,412.35. In the broader market, gainers led losers by about 2.1:1 on volume of around 986.2 million shares.

STOCKS THAT MOVED

* Tata Steel Ltd, the world's No.7 steelmaker, ended 0.33 percent up ahead of its December-quarter results, expected after market hours. Analysts, on average, estimate a 41 percent fall in net profit to 5.6 billion rupees, according to Thomson Reuters I/B/E/S.

* Mid-sized drug maker Dishman Pharmaceuticals ended 8.7 percent up after its net profit jumped ten-fold to 167.2 million rupees.

* Engineering and construction company Unity Infraprojects rose 4.9 percent after it received two orders worth 4.85 billion rupees.

TOP THREE BY VOLUME

* Hindalco on 43.6 million shares

* Suzlon Energy on 39.9 million shares

* Unitech on 37.4 million shares

FACTORS TO WATCH * India bond report * India rupee report * Euro hits 2-month high as market bets on Greece deal * Brent rises above $117 on demand hopes, Iran woes * Euro, shares advance on Greek deal hopes * Wall St ends flat; Cisco gains after the bell * For closing rates of Indian ADRs

(Editing by Aradhana Aravindan)

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