Indian shares up but set for yearly fall since 2001

* Shares rise on hopes for econ package, overseas markets

* Main index set to end six-year gaining run

* Satyam rises; Larsen up on infrastructure boost hopes
(Updates to early afternoon)

BANGALORE, Dec 31 (Reuters) - India's main share index rose
0.6 percent in choppy trade on Wednesday, but was on course to
post its first yearly drop in seven years and the outlook was
dented by slowing corporate earnings.
The market has lost more than half its value in 2008, making
it one of the worst performers in Asia this year, with foreign
funds withdrawing more than $13 billion as a credit turmoil
roiled world bourses.

"There is still a fair amount of uncertainty coming out of
the sheer surprises that keep happening in the global financial
market," said Nipun Mehta, executive director and head of SG
Private Banking in India.

"Given this uncertainty, there is a good possibility that
there could be implications for the Indian markets over the
next two to three quarters," he said. "You can't take any broad
change in sentiment for granted."

By 12:20 p.m. (0650 GMT), the 30-share BSE index
was up 0.64 percent, or 62.08 points, at 9,778.24, with 20 of
its components rising. It opened 0.9 percent higher and fell
0.4 percent before rebounding.

Shares in Satyam Computer Services (SATY.BO) rose as much
as 7 percent to 171.90 rupees on hopes the embattled Indian
outsourcer will announce a hefty share buyback and a management
change at its board meeting on Jan. 10.
The stock has risen 27 percent in three days on speculation
of private equity interest and a management change as criticism
mount for a lack of transparency after its botched attempt to
buy two construction firms in which Satyam management held
stakes. For related stories on Satyam, see [ID:nBOM412356]

Traders said the market may find strength if the government
unveiled another economic stimulus package, but hopes for hefty
rate cuts were dented after a television channel quoted finance
ministry officials as saying rate reductions may not be steep.

CNBC-TV18 channel also cited unnamed bankers as saying they
were not in a position to cut deposit rates due to competition
from the government's small savings plans. This meant they can
not lower lending rates as well.

The 10-year benchmark bond yield IN082418G=CC fell to
5.18 percent, its lowest since May 2004, in early trade before
bouncing to 5.31 percent by 0626 GMT on the TV report, up from
5.27 percent at Tuesday's close.

At the low, the yield had fallen 189 basis points in
December and traders said bond prices had already factored in a
one percentage point cut in the central bank's key short-term
rates.

Shares in No. 2 lender ICICI Bank (ICBK.BO) was 0.5 percent
lower at 455.70 rupees and its bigger rival State Bank of India
(SBI.BO) edged down 0.1 percent at 1,287 rupees.

Indian policy makers have slashed rates and cut duties to
shore up growth in Asia's third-largest economy, which has been
slowing faster than expected due to high interest rates and the
global financial crisis.

A Reuters poll has showed economists expect India's economy
to grow 6.8 percent in 2008/09, its slowest in six years, and
6.2 percent the following year.

Shares in construction play Larsen & Toubro (LART.BO) rose
2 percent to 785.65 rupees, amid market talk that the
government may soon unveil a package for the infrastructure
sector that has been badly hit by the economic slowdown,
traders said.
Energy group Reliance Industries (RELI.BO) was up 0.6 percent
at 1,257 rupees, even as Standard & Poor's revised its rating
outlook on the company to negative from stable, citing its
increased debt and pressure on profitability. [ID:nWNA3238]

In the broader market, 1,498 gainers were ahead of 626
losers on average volume of 150 million shares.

The 50-share NSE index was up 0.37 percent at
2,990.45.

STOCKS ON THE MOVE

* State-run Oil and Natural Gas Corp (ONGC.BO) fell 0.8
percent to 666 rupees after more than 90 percent of Imperial
Energy investors accepted a 1.3 billion pounds ($1.88 billion)
takeover bid from the Indian oil company. [ID:nLU88079]

Analysts say the deal will be negative for ONGC, as it was
agreed when crude traded at around $130 a barrel, compared with
less than $40 now. Local media said the Indian government
wanted ONGC to renegotiate the deal price due to the drop in
oil prices.

* Drugmaker Aurobindo Pharma (ARBN.BO) was up 3.8 percent
at 167.20 rupees after it received final approval from the U.S.
Food and Drug Administration for stavudine capsules and oral
solution, used in the treatment for HIV infection.

MAIN TOP 3 BY VOLUME

* Reliance Natural Resources (RENR.BO) on 15 million shares

* Unitech (UNTE.BO) on 12 million shares

* Satyam Computer Services on 10 million shares

FACTORS TO WATCH
* Indian rupee eases as import payments weigh
[INR/]
* Indian bond yields hit 4-½ yr low, bounce
[IN/]
* FOREX-Euro up against dollar, but set for full-year fall

[FRX/]
* Oil falls below $39, heads for worst year ever
[O/R]
* GLOBAL MARKETS-Grimmest of years ends with touch of hope

[MKTS/GLOB]
* US STOCKS- Wall St gains as latest auto bailout raises hopes
[.N]
* For closing rates of Indian ADRs
INADR
(Reporting by Sumeet Chatterjee; Editing by Ranjit
Gangadharan)