Indian shares gain most since Jan. on rate cut hopes

(Adds details, updates prices)
MUMBAI, June 6 (Reuters) - India's main indexes rose well
over 2 percent on Wednesday, posting their biggest daily
percentage gains since Jan. 3, as continued hopes the central
bank would cut interest rates sparked a rally in sectors such as
autos and banks.
The hopes for monetary relief are boosting domestic stocks
for a third consecutive day, marking a recovery from steep falls
in May, when markets were hit by a toxic mix of global risk
aversion and worries about India's economic and fiscal
fundamentals.
Data showing India's economy grew at a nine-year low of 5.3
percent during the last fiscal quarter, slumping oil prices, and
recent comments from a Reserve Bank of India deputy governor
that were widely seen as more dovish have boosted expectations
for rate cuts.
Indian stocks outperformed gains in other Asian indexes on
Wednesday, with some blue chips seen as oversold after the
benchmark BSE index fell to a 2012 intraday low on Monday,
marking a 15 percent drop from the year's peak hit in February.
"Its an oversold market and large part of today's sporadic
rise is on account of short-covering caused by rate cut
expectations," said Deven Choksey, managing director of K. R.
Choksey Securities.
India's main 30-share BSE index rose 2.71 percent
to end at 16,454.30 points, almost matching the 2.72 percent
gain seen on Jan. 3.
The broader 50-share NSE index rose 2.75 percent to
4,977.10 points, also marking its biggest gain since Jan. 3.
A Reuters poll on Tuesday showed a majority of analysts
expect the Reserve Bank of India to cut the repo rate during its
June 18 meeting, though inflation and industrial output data
next week will be key in adjusting those expectations.

The gains came even as foreign institutional investors have
sold Indian stocks worth 13.47 billion rupees ($242.07
million)in the month of June as of Tuesday's close, according to
regulatory data.
Banking shares, as measured by the NSE banking index
, rose for a third consecutive day. HDFC Bank
gained 3.7 percent.
Autos, which would benefit from lower financing costs should
interest rates be lowered, gained as well. Tata Motors
rose 5.8 percent, recovering from recent steep losses.
The gains were widespread. Shares in consumer good stocks
rallied as well, recovering from recent steep falls. ITC
gained 3.8 percent, while Hindustan Unilever
gains 3.1 percent.
($1 = 55.6450 Indian rupees)

(Reporting by Abhishek Vishnoi; Editing by Rafael Nam)