* Shares up 1.6 percent
* Materials, financial sector lead gains
* Investors unwinding risk of possible Greek exit - analyst (Adds analysis, quotes, stocks on the move)
By Charlotte Greenfield and Gyles Beckford
SYDNEY/WELLINGTON, July 14 (Reuters) - Australian shares rose on Tuesday on broad-based gains as investors grew confident Greece would not leave the euro zone after it reached a conditional debt agreement with its creditors.
The S&P/ASX 200 index rose 1.6 percent, or 85.530 points, to 5,580.7 by 0215 GMT. The benchmark edged down 0.34 percent on Monday.
"This move is all about Greece," said Ric Spooner, market strategist at CMC Markets.
"Markets, including our own, have moved pretty quickly to unwind the risk premium that they had factored in to allow for the possibility of disruption to the wider financial markets and economies that might have come out of an unplanned exit by Greece from the euro zone."
Greece's Prime Minister on Monday made a deal with creditors at an emergency summit, leaving the leader to face a showdown with his own party members who are furious at his agreement to German demands for a sweeping austerity package.
The materials sector led gains, up 2.4 percent as stabilising commodity prices and Chinese equity markets spurred bullish sentiment. BHP Billiton and Rio Tinto both rose 3 percent.
The financial sector also rose with all major banks firmer. Westpac rose 1.7 percent and Macquarie was up 2.2 percent.
Shares of goldminer Sandfire Resources Ltd rose as much as 7.7 percent after reporting a new discovery from its diamond drilling project.
But gold miner Red 5 Ltd plummeted as much as 41.7 percent after the company said it completed an assessment of impact from the movement of material into an open pit at one of its gold projects.
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New Zealand's benchmark NZX50 share index bounced back 0.4 percent to 5,729.21 as investors were buoyed by the prospect of a bailout package for Greece.
The gains were led by Contact Energy which rebounded 3.1 percent after it hit a 10-month low on Monday.
Other leading stocks which had borne the brunt of selling recently, including software company Xero, Fletcher Building and Sky City, also posted gains around 1 percent.
Oil refinery operator NZ Refining was up 1.3 percent as it reported a lift in revenue and processing.
Meridian Energy was flat despite reporting that winter rains had filled hydro lakes and boosted power sales, with uncertainty over its supply contract to an aluminium smelter weighing on sentiment.
The market is expected to continue trading sideways driven by broader risk sentiment with little corporate news expected ahead of the full year reporting season due to start next month.
Editing by Jacqueline Wong