Indian shares gain after U.S. senate approves 'fiscal cliff' deal

* BSE index gains 0.79 pct; NSE ends 0.77 pct higher
* Bank shares rise on rate cut expectations
* Metal shares advance on hopes of higher realisations

By Abhishek Vishnoi
MUMBAI, Jan 1 (Reuters) - Indian shares rose on Tuesday
after the U.S. averted the looming 'fiscal cliff' in a
last-minute deal with hopes of a rate cut by the Reserve Bank of
India beginning to gather steam, leading to gains in bank
shares.
Analysts say with the New Year Day holidays, U.S. Congress
still has time to draw up legislation and backdate it to avoid
the harsh fiscal measures including tax hikes and spending cuts,
which many fear could cripple the world economy in 2013.
While Indian stocks are expected to remain firm in January
tracking expectations of a rate cut by the Reserve Bank of
India, negative local fundamentals, namely twin deficits and
sticky inflation, may limit the outperformance in the near term.
"While the macro environment both domestically and globally
does not inspire much confidence, at the micro level things are
looking good," said Atul Kumar, Senior Fund Manager at Quantum
Asset Management Company Pvt. Ltd.
The fiscal deficit is likely to exceed the target set by the
government due to higher subsidy burden, which can also turn
into a constraint for the RBI to cut rates, added Kumar.
The benchmark BSE index rose 0.79 percent, or
154.10 points, to end at 19,580.81 after earlier hitting its
highest level intraday since Apr. 27, 2011.
The broader NSE index rose 0.77 percent, or 45.75
points, to end at 5,950.85.
Option traders see the probability of the 50-stock index or
Nifty inching closer to 6,200 levels in the January derivative
series which ends on Jan. 31.
Banking stocks including ICICI Bank rose on
expectations of a cut in interest rates by the Reserve Bank of
India in January.
ICICI Bank ended up 1.8 percent, while State Bank of India
ended 1.7 percent higher.
Shares in Indian steel companies including Tata Steel
gained on expectations of better realisations as China
plans to scrap a 40 percent export duty on metallurgical coke, a
steelmaking raw material, from Tuesday.
Tata Steel gained 2.3 percent while Jindal Steel and Power
ended 3 percent higher.
Shares in Glenmark Pharmaceuticals gained 1.9
percent after U.S. health regulators approved Salix
Pharmaceuticals Ltd's drug to treat diarrhoea in
HIV/AIDS patients on qantiretroviral therapy, a combination of
medicines used to treat HIV infection.
Aurobindo Pharma Ltd rose 2.14 percent after it
said in a statement that it has got final approvals from U.S.
FDA for Rizatriptan Benzoate tablets and the product is ready
for launch.
However, among stocks that fell, oil marketing companies
fell on fading hopes of a hike in diesel price any time soon,
dealers said.
Indian Oil Corp. fell 1.2 percent while Hindustan
Petroleum Corporation ended 0.4 percent lower.
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FACTORS TO WATCH
* Dollar rises in thin trade, ends 2012 lower overall
* Brent crude rises, hits record annual average for 2012
* Equities rally as US 'cliff' deal nears; oil up
* Foreign institutional investor flows
* For closing rates of Indian ADRs

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(Editing by Sunil Nair)