Indian shares top 20,000; mkt expects U.S. rate cut

By Hiral Vora

MUMBAI (Reuters) - Indian shares stormed to their 21st record high in 28 sessions since the U.S. Federal Reserve cut interest rates last month, surging above 20,000 for the first time on Monday as traders priced in another U.S. rate cut this week.

Engineering and construction firm Larsen & Toubro led gains with a 10.3 percent rise, following a 12.2 percent gain on Friday. The company, whose shares have almost tripled this year, is seen as a big beneficiary of India's push to upgrade its ageing and inadequate infrastructure.

The market ended up 3.82 percent, or 734.50 points, at 19,977.97, just off a high of 20,024.87 hit in late trade.

The index has now risen 27.5 percent since the U.S. rate cut and almost 43 percent -- or almost 6,000 points -- since its weakest close during the subprime crisis in August.

"India is no longer an option but a compulsion for an overseas investor, and money will flow like water as we are a very lucrative market," said Amitabh Chakraborty, president for equities at Religare Securities Ltd.

"A lot of liquidity is expected to flow into our markets if the Fed cuts interest rate this week, and lower inflation will also help," he said.

The record-setting run has been driven by foreign funds, who have bought a net $17 billion of shares this year up to Friday, but the massive inflows have worried policy makers.

"I am bullish on India. Ideally India offers a very good opportunity for international investors," said Richard Frank, CEO at Washington-based Darby Overseas Investments Ltd.