Indian shares end higher; ITC, SBI gain

* BSE ends up 0.26 pct; NSE rose 0.22 pct
* Fitch renews warning on India's outlook
* India's L&T falls on downgrade by brokerages

By Manoj Dharra
MUMBAI, Jan 8 (Reuters) - Indian shares ended higher on
Tuesday, led by gains in defensive shares including index
heavyweight ITC Ltd and as State Bank of India rose after BofA
Merrill upgraded the stock.
Traders say markets are now awaiting fresh impetus from the
government as it tries to contain the ballooning fiscal deficit
and meet its disinvestment target.
Fitch Ratings reiterated on Tuesday its 'negative' outlook
on India's sovereign credit rating, citing concerns about
slowing economic growth, persistent inflationary pressures and
an uncertain fiscal outlook.
Broader earnings outcome of blue chip companies such as
Infosys on Friday and Tata Consultancy Services on Monday will
set the tone in the coming weeks. Analysts will watch management
commentary for direction on the technology sector.
"Third-quarter earnings would be a key focus in the near
term, but I don't expect earnings to give material positives,"
said Vijay Kedia, director at private wealth management firm
Kedia Securities.
The impact of government policies would be felt only after a
few months, Kedia added.
The BSE index rose 0.26 percent, or 51.10 points,
to end at 19,742.52.
The broader NSE index ended 0.22 percent higher, or
13.30 points, at 6,001.70.
Defensive stocks led the gainers on value buying, with
cigarette-maker ITC Ltd ending 2.4 percent higher. Its
shares fell 3.9 percent last month and 2.7 percent in January
till Monday's close.
Drugmakers rose, with Cipla Ltd ending up 1.2
percent, its all-time highest close at 429.50 rupees. Dr Reddy's
Laboratories also ended at a record high 1,908.15
rupees.
Shares of education services provider Educomp Solutions
surged 3.2 percent after announcing the sale of its
entire 50 percent stake in Eurokids International.

State Bank of India shares ended up 1.04 percent.
Earlier, Bank of America Merrill Lynch upgraded state-owned
banks SBI, Bank of Baroda, and Oriental Bank of
Commerce Ltd to 'buy'.
The investment bank said the upgrades came on the back of a
steepening bond yield curve in anticipation of rate cuts by
India's central bank, stronger-than-expected loan recoveries,
and reduced quality pressures.
Among decliners, shares of Larsen & Toubro Ltd
fell 1.3 percent after Citigroup and Barclays downgraded the
engineering conglomerate on concerns over order cancellations
and weak investment cycle.
Citi downgraded L&T to 'neutral' from 'buy' and cut its
target price to 1,732 rupees from 1,855 rupees, citing
cancellations in the second quarter of fiscal 2013, slow-moving
orders, as well as a weaker domestic economic growth.

Oil companies fell on profit-taking after a recent rally,
with Hindustan Petroleum Corp dropping 1.8 percent
after rising 13.54 percent in the previous four sessions, while
Bharat Petroleum Corp ended 1.2 percent lower.
Infosys Ltd, India's second-largest software
exporter, fell 1.3 percent on investor caution ahead of December
quarter earnings on Friday.
Infosys was trading at a 36 percent discount to its 10-year
median P/E, the widest gap among large-cap Indian technology
stocks, according to Thomson Reuters' StarMine estimates.

Link to graphics: link.reuters.com/waw94t

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FACTORS TO WATCH
* Euro falls vs yen, Japan ESM talk has limited impact
* Brent crude holds above $111 ahead of China data
* European shares, euro dip ahead of data rush
* Foreign institutional investor flows
* For closing rates of Indian ADRs

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(Additional Reporting by Abhishek Vishnoi; Editing by Prateek
Chatterjee)