Indian shares post biggest daily gain in Dec; foreign flow strong

* BSE up 0.84 pct; NSE gains 0.85 pct
* Bank shares up on RBI's liquidity measures
* India to extend subsidy for some exports until March 2014

By Manoj Dharra
MUMBAI, Dec 26 (Reuters) - Indian shares posted their
biggest daily gain this month on Wednesday as banks advanced on
hopes the central bank would continue to inject liquidity, while
Larsen & Toubro rose after the government extended interest
subsidies for some exporters.
Energy shares such as Reliance Industries also
gained on hopes a government-appointed panel looking at oil and
gas exploration contracts would recommend a pricing formula that
could sharply raise the price of natural gas.
Credit Analysis and Research Ltd (CARE) was
another top gainer for the day, making its debut in the stock
market after raising $98 million in an initial price offering,
in the first of three companies that will list this week.
Broader sentiment was also underpinned by strong recent
buying by foreign institutional investors, who bought a net $719
million in domestic stocks on Dec. 24, the biggest single-day
inflow since Oct. 5, bringing their total for the year to $24.05
billion.
"Even thought FIIs are on vacation there is a very high
underlying demand. Flows so far have been positive," said Hitash
Dang, vice president at Jaypee Capital.
"Every time there is a correction there are new entrants or
there is again a buying opportunity," Dang added.
The benchmark BSE index rose 0.84 percent, or
162.37 points, to end at 19,417.46, its biggest percentage gain
since Nov. 30.
The broader NSE index rose 0.85 percent, or 49.85
points, to end at 5,905.60, also posting its biggest gain since
Nov. 30.
Banks rose after the central bank announced plans to buy 80
billion rupees ($1.5 billion) of bonds via open market
operations on Dec. 28, marking the fourth consecutive weekly
debt purchase.
The actions from the Reserve Bank of India brought some
relief as advance tax outflows and an increase in government's
cash balance with the RBI have temporarily exacerbated liquidity
tightness in the banking sector.
ICICI Bank rose 2.4 percent, while State Bank of
India gained 1.7 percent.
Bharat Heavy Electricals gained 1.14 percent while
Larsen & Toubro ended 2.3 percent higher after the
government announced incentives to revive growth in exports,
including extending an interest rate subsidy for some exporters.

Reliance Industries rose 0.9 percent. The so-called
Rangarajan committee has submitted its recommendations to the
Prime Minister's Office this month, and media reports say one of
the proposals include a new pricing formula for natural gas that
could raise prices substantially.
CARE shares rose 23 percent from its IPO price of 750 rupees
as investors who missed out on the IPO allocations bought the
stock due to optimism about its outlook.
However, Kingfisher shares fell 0.31 percent after
India's aviation minister said a revival plan submitted by the
firm was not backed by a clear funding proposal.
The carrier had on Monday submitted a revival plan to resume
operations after having flying licence suspended in October.
Auto-maker Tata Motors Ltd fell 0.3 percent on
profit-booking after the shares had gained 12 percent this
month, as of Monday's close.

(Editing by Sunil Nair)