Indian shares rise 1.6 pct; Tata Motors rallies

* Robust Nov auto sales, easing Dubai worry boost sentiment

* Tata Motors races to 18-month high; Maruti gains 1.7 pct

* Banks rise as rapid econ growth reaffirms strong outlook
(Updates to close)

By Ami Shah

MUMBAI, Dec 1 (Reuters) - Indian shares rose for a second
day rallying 1.6 percent on Tuesday, as easing concerns about
the Dubai debt crisis and robust November automobile sales
boosted investor confidence on the growth outlook.

The market, which had climbed 1.8 percent on Monday after a
surprisingly strong 7.9 percent economic expansion in the
September quarter, was also helped by higher world markets.

Tata Motors (TAMO.BO) leapt to an 18-month high of 708
rupees as investors bet the country's top truck maker that also
produces cars would be a key beneficiary as the economy picks
up steam.

Leading car maker Maruti Suzuki (MRTI.BO), majority owned
by Japan's Suzuki Motor Corp (7269.T), raced 1.7 percent to
1,588.15 rupees after it posted a 67 percent jump in November
sales from a year earlier. [ID:nBMA006518]

Tata Motors, which is set to release November sales later,
ended up 6 percent at 700.75 rupees.

"We expect Tata Motors to benefit significantly from the
revival in sales in the domestic and developed markets on the
back of a macro economic recovery," Macquarie Capital
Securities said in a report.

The brokerage upgraded the stock to outperform from
underperform, and set a 12-month target price of 789 rupees.

The 30-share BSE index closed up 1.61 percent, or
272.05 points, at 17,198.27, with 27 of its components gaining.

Following the strong September quarter expansion, the
economy could grow 7 percent this fiscal year, with industrial
output and services offsetting an expected decline in farm
output, a top government official said.

"The latest numbers do indicate that industry and services
are growing very strongly," C. Rangarajan, chairman of the
prime minister's Economic Advisory Council, told reporters in
New Delhi.

"This could go to offset to a very large extent the impact
of the decline in agricultural production."

Ratnesh Kumar, CEO of institutional equities at Anand
Rathi, said the market was also helped by the realisation that
India don't really have a direct impact from the Dubai crisis.

The benchmark has rallied more than 78 percent in 2009,
with foreign funds pumping in more than $15 billion.

"Liquidity flows are strong from foreign funds and domestic
insurance companies. But there is a valuation challenge, as
earnings upgrade have not been as fast," said Kumar.

India's manufacturing activity expanded for the eighth
straight month in November but at its weakest pace since March
due to a slowdown in growth of output, new business and
employment, a survey showed.

The HSBC Markit Purchasing Managers' Index (PMI)
INPMI=ECI, based on a survey of 500 companies, fell to 53 in
November from 54.5 in October.

Energy giant Reliance Industries (RELI.BO) rose 3.3 percent
to 1,097.85 rupees, after it had slid 4.4 percent over two days
last week when Dubai's debt woes hit the world markets.

Banks logged strong gains, after the robust GDP data
reaffirmed investor faith in the growth story for the sector,
dealers said.

Top lender State Bank of India (SBI.BO) and rival ICICI
Bank (ICBK.BO) rose 2.4 percent and 2.6 percent respectively.

Metal stocks moved up on firm metal prices, dealers said.

Sterlite Industries (STRL.BO) firmed 3.2 percent while
Hindalco (HALC.BO) climbed 2.9 percent.

Leading motorcycle maker Hero Honda Motors (HROH.BO) rose
0.3 percent after it said November sales grew 32 percent from a
year earlier. [ID:nBMA006520]

Mahindra & Mahindra (MAHM.BO), the No. 1 tractor and
utility vehicle maker, jumped 4.8 percent to 1,078 rupees as
its sales soared 96 percent. [ID:nBMA006526]

The stock was also supported by the company's deal with BAE
Systems (BAES.L) to create a land systems focused joint venture
defence company in India. [ID:nWLA9401]

In the broader market, gainers led losers in a ratio of
2.8:1 on relatively moderate volume of 400 million shares.

The 50-share NSE index closed up 1.8 percent at
5,122.

STOCKS THAT MOVED

* Drug maker Cipla (CIPL.BO) rose 2.7 percent to 328.70
rupees. The firm is in talks with a host of global drug makers,
including Pfizer Inc (PFE.N), to supply generic products, an
executive said. [ID:nBMA006521]

* Essar Oil (ESRO.BO) gained 2.7 percent to 134.90 rupees
after the refiner and Royal Dutch Shell (RDSa.L) (RDSb.L)
extended their exclusive talks for the Indian firm to buy the
latter's three European refineries. [ID:nBOM537776]

* UTV Software Communications (UTVS.BO) firmed 4.2 percent
to 473 rupees after the television content provider and
broadcaster said its UTV Motion Pictures unit signed a clutch
of syndication deals worth 950 million rupees, granting
telecast rights on its movies produced in 2008 and 2009.
[ID:nBMB009173]

* State Bank of Mysore (SBKM.BO) rose 4.6 percent to 642.30
rupees, after the state-run lender said its board would
consider on Dec. 4 a rights issue to raise up to 6 billion
rupees.

MAIN TOP 3 BY VOLUME

* Unitech (UNTE.BO) on 33.1 million shares

* Suzlon Energy (SUZL.BO) on 19 million shares

* Jindal Cotex (JICL.BO) on 7.7 million shares

FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* India rupee report
[INR/]
* India bond report
[IN/]
* Yen falls on new BOJ operations, trims losses
[FRX/]
* Oil rises near $78 as concern eases over Dubai
[O/R]
* Equities rebound as Dubai fears wane
[MKTS/GLOB]
* Wall St set for higher open; ISM data awaited
[.N]
* For closing rates of Indian ADRs
INADR
(Editing by Ranjit Gangadharan)
((ami.shah@thomsonreuters.com; +91 22 6636 9246; Reuters
Messaging: ami.shah.thomsonreuters.com@reuters.net))
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