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NEW DELHI (Reuters) - The BSE Sensex rose 0.43 percent on Wednesday, as global equities gained on growing hopes of a decisive solution to the euro zone debt crisis soon, while data showing foreign funds' resumption of investing in local shares this month supported sentiment.
Investors also cheered an end to the parliament logjam, after government suspended its move to open the country's $450 billion supermarket sector to foreign firms in the face of a huge political backlash, which had seen the opposition disrupting parliament for two weeks.
"I think the only thing driving the market is hope. Hope that something will happen in Europe," said Arun Kejriwal, strategist at research firm KRIS.
The main 30-share BSE index closed up 71.73 points at 16,877.06, with more than two-thirds of its components closing in the green. The index, which rose as much as 1.2 percent earlier, is still down 17.7 percent this year.
"The fact is that 11 months are over, and we are still negative. It clearly shows the feeling that has been there in the market, the underperformance. Foreign investors were not interested in buying," Kejriwal said.
Foreign funds have invested $313.82 million in Indian shares so far this month. In 2011, they have pulled out about $186.33 million, data from the capital markets regulator, Securities and Exchange Board of India showed.
Lenders rose on hopes that a cycle of rate increases, which started in March 2010, may be paused when India's central bank meets next week, and on the view that the central bank would take measures to support liquidity when required.
Majority of the fund managers believe that allocation towards Indian equity markets at current levels should be increased with an investment horizon of one year and above, a quarterly fund managers survey by ICICI Securities released on Wednesday showed.
Most of the fund managers expect the equity markets to be in the range of 16,000-18,700 points by the end of March 2012, as earnings growth expectations have been lowered. Even as valuations are more reasonable, a majority of them are cautious in the short-term, the survey showed.
Export-driven software firms, which count Europe as their second-biggest market, gained on hopes that a stable euro zone will aid deal flow, contributing the most as a single sector to the index's gains.
Industry bellwether Infosys gained 2.14 percent, while smaller rival Wipro (WIPR.NS) added 3.6 percent.
Growing optimism that euro zone leaders are on track to produce a confidence-boosting package of measures to solve the debt crisis at their weekend summit lifted risk appetite on Wednesday, with the euro and the global equity markets also posting gains.
The broader 50-share NSE index rose 0.47 percent to 5,062.60 points.
There were almost equal gainers and losers in the broader market. About 611.5 million shares changed hands.
At 1020 GMT, the FTSEurofirst 300 index of top European shares was up 0.64 percent. World stocks, as measured by the MSCI world equity index, rose 0.50 percent.
* Indiabulls Real Estate (INRL.NS) fell 9.8 percent a day before the date for determining its shareholders' entitlement in Indiabulls Infrastructure and Power IIPL.L, which was created following the spin-off of the real estate firm's power unit.
It fell as buyers, who had acquired the stock mainly with a view to getting the benefit of shares in the new company, sold them, as shares bought on Wednesday will not be entitled to additional shares of IIPL.
* Future Capital Holdings FCHL.NS rose 7.1 percent after a newspaper report said Deccan Chronicle Holdings (DCHL.NS) was acquiring a controlling stake from Pantaloon Retail PART.NS in the group's financial services firm for 6-7 billion rupees.
Pantaloon later denied any such transaction "at this stage."
* McNally Bharat Engineering (MCNL.NS) jumped as much as 1.3 percent, after the civil engineering firm said it got two orders worth 1.44 billion rupees.
* Indiabulls Real Estate on 39.4 million shares
* IFCI (IFCI.NS) on 16.8 million shares
* Suzlon (SUZL.NS) on 16.4 million shares
Reporting by Anurag Kotoky; editing by Malini Menon