Indian shares rise on Asian rally, ICICI Bank gains

MUMBAI (Reuters) - Indian shares rebounded more than 3 percent on Monday, led by financial stocks such as ICICI Bank as Asian markets rallied after a key U.S. lending rate cut eased global credit worries.

Investors shrugged off political uncertainties and focused on the world markets recovery, hoping this would reverse the outflow of capital from the domestic market.

At 12:02 p.m., the 30-share BSE index was up 2.11 percent, or 297.73 points, at 14,439.25, after rising as much as 3.8 percent.

Last week, the benchmark had fallen 4.9 percent on a global equities selloff. It was the biggest weekly loss in more than five months and pushed the index nearly 11 percent below a record 15,868.85 hit on July 24.

Foreign funds have sold $1.4 billion of Indian stocks this month, or about 14 percent of their net purchases in 2007, lowering their investment to $8.8 billion since end-2006.

"With global liquidity pressures easing, I think the outflow should stop now," said S.P. Tulsian, an independent consultant.

Analysts played down risks after communist allies warned on Saturday of "serious consequences" if the government pursued with a nuclear deal with the United States.

"I think there is probably no near-term risk to the market.

As far as reforms are concerned, we have not seen much happening. Privatisation has stopped," said Han Sia Yeo, strategist at Bank Of America in Singapore.