BSE Sensex gains ahead of parliament vote; RIL leads

People walk pass the Bombay Stock Exchange (BSE) building displaying India's benchmark share index on its facade, in Mumbai September 30, 2009.

MUMBAI (Reuters) - The BSE Sensex edged higher on Tuesday, rising for the fifth day in the last six sessions, led by gains in Reliance Industries, on hopes the government will soon approve the company's investment plans for the KG-D6 block.

Analysts said markets would closely track the progress on a crucial vote in the parliament on foreign direct investment in multi-brand retail sector and other reform initiatives for the near term.

Hopes of more open market operations and some monetary easing by the Reserve Bank of India by December-end also aided sentiment.

"Going ahead, market's movement will depend on the parliament's behaviour. If the government wins the FDI vote, it will be taken positively, but if they lose then selling cannot be ruled out," said R.K. Gupta, managing director at Taurus Mutual Fund.

However, there are apprehensions that while the government will be able to muster support for the bill in the Lok Sabha, it will still remain pending in the Rajya Sabha, Gupta added.

The benchmark BSE Sensex gained 0.22 percent, or 42.80 points, to end at 19,348.12.

The broader Nifty rose 0.31 percent, or 18.30 points, to end at 5,889.25, finding resistance around psychologically important 5,900 level.

Reliance Industries rose 2.6 percent, marking its highest single day percentage gain since September 17, on a report in the Economic Times newspaper that the oil ministry is poised to approve the company's investment plans for the controversial KG-D6 block, citing government sources.

Banking shares also rose on hopes of more central bank action, dealers said.

ICICI Bank ended 1.55 percent higher after earlier hitting a new 52-week high of 1122.60 rupees, while State Bank of India gained 1.6 percent, marking its sixth day of gains.

Earlier in the day, the RBI conducted an auction to buy up to 120 billion rupees of debt, including the benchmark 8.15 percent 2022 bond and the 8.19 percent 2020 bond.

Shares in Jaiprakash Power Ventures Ltd gained 9.9 percent after its parent company, Jaiprakash Associates Ltd, said the Amelia North coal mine has received the final Stage II forest clearance for diversion of 728.75 hectares of forest land for coal mining.

"Mine clearance has certainly been one of the important catalysts for JPVL's stock performance and removes a difficult overhang," Deutsche Bank said in a report.

Aurobindo Pharma Ltd rose 3.4 percent on hopes the company would get approval from U.S. drug regulators for a new plant in the coming few weeks, dealers say.

However, among stocks that fell, Hero MotoCorp Ltd dropped 0.6 percent after Bank of America Merrill Lynch downgraded the stock to 'underperform' from 'buy' and cut its target price to 1,650 rupees from 1,980 rupees.

The bank said it expects the company's domestic sales to remain muted and in "single digits" due to its dependence on 100cc bikes where better options are available with competitors, and likely structural shift to 150cc plus premium bikes where the "company's franchise is weak".

Larsen & Toubro Ltd (LART.NS) fell 0.5 percent after Jefferies said the company needs to announce additional projects worth 54 billion rupees this month to meet expected order flow of 180 billion rupees for the third-quarter.

Shares in India's Jet Airways ended 4.6 percent lower on profit-taking, after earlier gaining as much as 7.1 percent intraday, on reports that it may sell a 24 percent stake to Etihad Airways.

Retail shares such as Pantaloon Retail India ended marginally lower at 0.2 percent, ahead of the parliament vote.

(Additional reporting by Manoj Dharra; Editing by Anand Basu)