Sensex leaps as gains overseas spark buying

BANGALORE (Reuters) - Indian shares jumped nearly 6 percent on Tuesday in a shortened Diwali session to mark the beginning of the Hindu new accounting year, as gains in overseas markets triggered a bout of bargain hunting after recent sharp falls.

The market sank to its lowest close in almost three years in the previous session, but gains overseas, such as a 6.4 percent jump in Tokyo, brought buyers back to the market.

Reliance Industries, India's most valuable firm, led the gains, rising as much as 7.3 percent to 1,152.85 rupees on short covering by institutional investors. The stock is still down about 41 percent in October.

"It's just a sentiment-driven rally after the recovery in the world markets, and I would say some buying was waiting to happen after such a sharp plunge in the last few days," said Gajendra Nagpal, chief executive at Unicon Financial.

"But it would be premature to draw any conclusion from a one-day recovery in the market. Investors should continue to remain very cautious."

The main 30-share BSE index ended up 5.86 percent, or 498.52 points, at 9,008.08, after having risen as much as 6.4 percent earlier in the 60 minutes of trade that started at 1245 GMT. All the index's stocks ended higher.

The special session is held every year on an auspicious period on Diwali, the Hindu festival of lights.

The benchmark dived as much as 20 percent in the previous four sessions to touch a three-year low, caught up in a global maelstrom that had seen investors aggressively cutting their exposure to risky assets.

The BSE index is still down about 56 percent so far this year, making it one of the worst-performing Asian markets.