Indian shares rise 1.6 pct ahead of RBI decision

By Manoj Dharra

MUMBAI, June 15 (Reuters) - Indian shares rose on Friday to
their highest close in six weeks as banks gained on hopes for
aggressive monetary easing at home, and by hopes major central
banks would work to contain any global turmoil from Greek
elections.

Domestic stocks have rallied this month on hopes the Reserve
Bank of India's will cut interest rates by at least 25 basis
points on Monday. Some investors also see a joint cut in the
cash reserve ratio, or the amount of funds lenders must park
with the central bank.

Greek elections are on Sunday, adding to the potential risk,
though at least sentiment was boosted on reports that central
banks of major economies are ready to provide liquidity if
elections result dent global markets.

"Any adverse news flow in Greek result, or any deviation
what is expected on the policy front will trigger higher
volatility in markets," said Kaushik Dani a fund manager at
Peerless Mutual Fund, referring to RBI policy.

"If currency stabilises around 55 levels and if global
commodities continue to soften then definitely it will be good
news for our economy," he said, adding it would offset concerns
about inflation.

India's main 30-share BSE index rose 1.63 percent
to 16,949.83 points, posting its highest close since May 3 and
adding 1.4 percent for the week.

The broader 50-share NSE index advanced 1.67 percent
to 5,139.05 points.

Indian shares have rallied since the country posted its
weakest growth in nine years in the January-March quarter,
according to data released on May 31, raising expectations the
RBI would need to switch its focus from inflation to growth.

Data this week showed India's wholesale price index
inflation accelerated to 7.55 percent, which has put into
question how aggressive the RBI can afford to be in easing
rates.

But the tamer 4.8 percent core inflation has left
expectations for at least a 25 bps rate cut intact.

The BSE index has gained 4.5 percent this month, well
outperforming the 1.9 percent gain in the MSCI Asia-Pacific
index excluding Japan.

Banking shares, as measured by the NSE banking index
, rose 2.3 percent on Friday and have gained 6.6
percent so far this month.

ICICI Bank rose 3.3 percent, while HDFC Bank
advanced 2.5 percent.

Other interest rate-sensitive stocks also rose. Tata Motors
Ltd's gained 6 percent, helped as well after its May
global vehicle sales rose a stronger-than-expected 12 percent
from a year earlier.

Maruti Suzuki India rose 2.5 percent, while
Mahindra & Mahindra gained 2.7 percent as investors
hope aggressive rate cuts from the RBI would lower financing
costs for vehicle purchases.

Property stocks gained as well, with DLF gaining
2.8 percent.

Buying spread across a broad swath of sectors, with blue
chips ITC gaining 1.6 percent and Reliance Industries
rising 1.5 percent.

FACTORS TO WATCH

* Euro steady on expectations of central bank action

* Oil rises with central banks' pledge to step in

* Shares edge up before Greek vote

* Foreign institutional investor flows

* For closing rates of Indian ADRs

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(Additional reporting to Abhishek Vishnoi; Editing by Rafael
Nam)