MUMBAI (Reuters) - The BSE Sensex closed a choppy Wednesday session 0.7 percent higher, reversing early losses as second-quarter growth met forecast, with Reliance Industries (RELI.NS) leading the gains, while gloomy global economic conditions continued to weigh.
Dragged down by turmoil overseas, rampant inflation and a series of interest rate hikes by Asia's most hawkish central bank, data on Wednesday showed India's economy grew 6.9 percent in the last quarter, its slowest rate in more than two years.
Car makers and engineering and construction firms fell, as the data revealed the heavy toll global factors and home-grown problems were taking on the economy.
"GDP was bang in line with expectations and that's the main reason why the market moved up," said Dipen Shah, head of research for private client group at Kotak Securities in Mumbai.
"Given the slowing growth, there's a sense in the market that the central bank might pause in its tightening cycle."
The main 30-share index closed up 0.72 percent at 16,123.46 points, with 20 of its components gaining.
Energy major Reliance, India's most valuable firm by market capitalisation, closed up 1.7 percent at 778.25 rupees, after media reports said the oil and gas major was looking to raise $1 billion to fund its shale gas ventures in the United States.
Tata Motors (TAMO.NS), India's third-largest car maker by domestic sales, saw its shares close down 2.6 percent at 172.80 rupees. Fellow automaker Hero MotoCorp (HROM.NS) ended down 3.0 percent at 1,999.70 rupees.
Toughening domestic economic conditions have chipped away demand for vehicles, dragging automakers, while engineering and construction firms have warned of deferred projects and slowing investment spending.
Larsen & Toubro (LART.NS), the country's biggest engineering conglomerate, shed 0.4 percent to close at 1,272.15 rupees, after falling as much as 2.1 percent intra-day. Construction firm Jaiprakash Associates ended the day at 62.10 rupees, down 1.7 percent.
Banking and finance stocks rallied after the release of the GDP data, helping lift the benchmark index into positive territory.
State Bank of India (SBI.NS), the country's top lender, ended the day at 1,762.45 rupees, up 0.1 percent. The stock rose as much as 1.9 percent after the data release, gaining back lost ground.
Shares in rival ICICI Bank (ICBK.NS) closed down 2.9 percent at 712.45 rupees, its lowest level since September 2009, after the stock's weightage on the Morgan Stanley Capital International MSCI.L index was reduced to 3 percent from 5 percent.
The banking sector has been hit by slower loan growth and higher defaults by customers due to rising interest rates.
The government refused to allow a parliamentary vote on Wednesday on rolling back a plan to open up the country's $450 billion retail sector to foreign supermarkets.
The current legislative session, which has been disrupted in the past six days, now faces more of it, making it unlikely that any significant laws will be passed this year.
The 50-share NSE index .NSEI closed up 0.56 percent at 4,832.05 points.
In the broader market, declining stocks outnumbered gainers by 1.7:1 on total volume of about 782 million shares.
Shares across Asia fell on Wednesday as caution set in over the chance for more progress in resolving euro zone debt woes after officials agreed to strengthen a rescue fund and seek more aid from the International Monetary Fund.
The MSCI's broadest index of Asia Pacific shares outside Japan fell 0.34 percent and Japan's Nikkei closed down 0.51 percent.
* Ansal Housing & Construction Ltd (ANSL.NS) jumped 20 percent, hitting its daily limit, after the firm said late Tuesday its board would meet on Friday to consider a buyback of shares.
* Shares in Ranbaxy Laboratories (RANB.NS) fell as much as 4.95 percent, after the drugmaker did not announce a final settlement with regulators in the United States over the launch of its copy-cat version of cholesterol-lowering drug Lipitor, which loses its patent on Wednesday.
* Bharti Airtel (BRTI.NS), India's biggest mobile phone firm, rose as much as 4.1 percent, after the firm announced it had crossed 50 million customers in Africa.
* Idea Cellular (IDEA.NS) on 51.1 million shares
* Bharti Airtel on 47.1 million shares
* Steel Authority of India (SAIL.NS) on 33.2 million shares
Editing by Malini Menon