* BSE index jumps 4.95 pct on global rally
* Hopes for U.S. banking recovery underpins market
* Bears still lurking, rise could be shortlived-traders (Updates to close)
By Pratish Narayanan
MUMBAI, March 13 (Reuters) - Indian shares rallied nearly 5 percent on Friday to post their biggest rise in three months, as hopes for a recovery in the battered U.S. banking system boosted investor confidence across the world.
Energy giant Reliance Industries (RELI.BO) and financials such as private sector lenders ICICI Bank (ICBK.BO) and HDFC Bank (HDBK.BO) led the gains.
"It is a typical bear market rally," said Deven Choksey, chief executive of brokerage K R Choksey. "Financial stocks are showing some stability."
The 30-share BSE index .BSESN rose 4.95 percent, or 412.86 points, to 8,756.61, its biggest one-day percentage gain since last Dec. 10. The benchmark firmed 5.2 percent in the holiday-shortened week, its best weekly rise since late January.
Twenty-eight of its components rose while in the broader market, gainers led losers in the ratio of 2:1 but volume was relatively light at 266.1 million shares.
Financial stocks were boosted after Bank of America (BAC.N) Chief Executive Kenneth Lewis said the largest U.S. bank was profitable in January and February, echoing statements by Citigroup (C.N) and JPMorgan Chase (JPM.N) executives earlier in the week. [ID:nN12368897]
ICICI gained 8.6 percent to 308.70 rupees, its best one-day rise in almost three months. Rival HDFC Bank and state-run lender State Bank of India (SBI.BO) rose about 4.5 percent each.
The banking sector index .BSEBANK ended the week up 6.3 percent, its best performance in six weeks.
Reliance Industries, which has the biggest weighting in the main index, climbed 6.7 percent to 1,282.35 rupees.
Top telecoms firm Bharti Airtel (BRTI.BO), which had shed as much as 1 percent during the session, rebounded to close up 1.5 percent at 558.70 rupees. The stock had lost 6.4 percent on Thursday after its CEO sold his holding in the firm. [ID:nDEL407332] [ID:nDEL293967]
Fraud-tainted Satyam Computer SATY.BO shed 3.6 percent to 45.50 rupees, a day after its deadline for potential bidders to register ended. Two investment banking sources sources told Reuters about eight suitors had registered. [ID:nBOM373627]
The 50-share NSE index .NSEI closed up 3.9 percent at 2,719.25.
Chartists say the market may be near a bottom, but more evidence was needed for a decisive turnaround. For a technical analysis, see: here
Traders were also concerned about foreign funds that have been heavy sellers this year. The funds have pulled about $2.3 billion from Indian stocks since the beginning of January, adding to more than $13 billion they sold in 2008.
On Thursday, when the BSE index rose 2.25 percent, foreign funds were net sellers of $24.6 million, data showed.
"Most foreign investors are reluctant to increase exposure to India until after the election," CLSA Asia-Pacific Markets said in a note to clients.
Month-long national polls end by the middle of May.
MAIN TOP 3 BY VOLUME
* Satyam Computer on 23.8 million shares
* ICICI Bank on 8.3 million shares
* Unitech Ltd (UNTE.BO) on 7.4 million shares
STOCKS THAT MOVED
* Wipro Ltd (WIPR.BO) rose 5.9 percent to 224.55 rupees after the software services company said late on Thursday its unit had won a 6-½ year outsourcing contract worth $228 million from an Indian government agency.
* Strides Arcolab STAR.BO jumped 6.9 percent to 70.15 rupees after it ended a license and supply pact with U.S. drug firm KV Pharmaceutical KVa.N, which faced lawsuits in the United States. [ID:nBMB004835] [ID:nBNG497099]
* Power equipment maker Emco Ltd (EMCO.BO) rose 8.6 percent to 28.30 rupees after the company said late on Thursday it got five orders worth a total 5.5 billion rupees from Power Grid Corp of India (PGRD.BO).
FACTORS TO WATCH * Indian rupee higher on stock rally, weak dollar [INR/] * Indian bond yields at 4-mth high; auction watched [IN/] * Euro hits 2-mth high vs yen, 2-½ week high vs dlr [FRX/] * Oil falls below $47 ahead of OPEC meeting [O/R] * World stocks power higher on better banking hope [MKTS/GLOB] * Index futures point to higher Wall St open
[.N] * For closing rates of Indian ADRs
INADR (Editing by Ranjit Gangadharan)