Indian shares hit 2-yr highs; some analysts see pullback

* BSE index gains 0.68 pct; NSE ends 0.71 pct higher
* Financial stocks extend gains on rate cut hopes
* BHEl gains as India imposes duty on Chinese insulators

By Abhishek Vishnoi
MUMBAI, Jan 2 (Reuters) - India's NSE index rose to a
two-year high on Wednesday, breaching the key psychological
level of 6,000 at one point, after a U.S. deal on its so-called
"fiscal cliff" sparked broad buying, while financial firms
extended a recent rally on hopes of a rate cut this month.
U.S. lawmakers approved a plan to prevent huge tax increases
and delay spending cuts that together would have pushed the
world's largest economy into a likely recession.
However, despite expectations sturdier global economic
growth and the Reserve Bank of India's easing actions would
support portfolio inflows, some fund managers warned Indian
shares are looking overbought in the near-term after rallying in
2012.
"Ahead of earnings season there would be profit booking in
January as corporates may stick to giving cautious outlook,"
said Deven Choksey, MD, K R Choksey Securities.
Reversal of interest rate cycle which can spur growth and
thereby markets, however, remain key for the medium term, added
Choksey.
The benchmark BSE index rose 0.68 percent, or
133.43 points, to end at 19714.24, after earlier rising to its
highest close since Jan. 6, 2011.
The broader NSE index rose 0.71 percent, or 42.40
points, to end at 5993.25.
The index earlier rose to as high as high as 6,006.05
points, marking its highest intraday level since Jan. 7, 2011.

Indian shares have rallied since last year, with the BSE
index up 1.5 percent in the two trading sessions so far this
year after surging 25.7 percent in 2012.
Also aiding the sentiment, India's manufacturing activity
surged to a six-month high in December, boosted by strong
factory output and a spike in new orders, both of which hit
their highest levels since June, a business survey showed on
Wednesday.
Financial shares led the gainers on growing hopes the RBI
will cut interest rates for the first time since April when it
meets on Jan. 29.
Housing Development and Finance Corp rose 1.6
percent, while ICICI Bank ended 1.3 percent higher.
India's Bajaj Auto rose 3.3 percent, marking its
all-time high close, after reporting 13 percent growth in total
sales in December 20.
Shares of India's Bharat Heavy Electricals Ltd
rose 2.3 percent after the government imposed a 35 percent
safeguard duty on electrical insulators imported from China, in
a bid to protect domestic manufacturers from cheaper shipments.

Aurobindo Pharma rose 4.3 percent, extending
Tuesday's 2.14 percent gain, after it said it has got final
approvals from U.S. FDA for Rizatriptan Benzoate tablets and the
product is ready for launch.
However, among decliners, consumer stocks such as ITC
fell as traders tracked a global 'risk-on' mood.
ITC fell 0.64 percent, while Hindustan Unilever
ended 0.02 percent lower.
Bombay Stock Exchange's fast-moving consumer goods index
rose 46.6 percent last year, marking it one of the
best-performing sectors.
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FACTORS TO WATCH
* Yen slides as U.S. avoids 'fiscal cliff' dollar retreats
* Oil hits 4-week high above $112 after US fiscal deal
* U.S. fiscal cliff deal prompts broad rally
* Foreign institutional investor flows
* For closing rates of Indian ADRs

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