Indian shares rally 3 pct on stimulus hopes

* Govt sees 2008/09 GDP growth at six-year-low of 7.1 pct

* Final figure could be much lower as global woes bite

* Tata Steel climbs 7.2 pct on higher Jan steel output
(Updates to close)

By Prashant Mehra

MUMBAI, Feb 9 (Reuters) - Indian shares rallied 3 percent
on Monday to their highest close in a month, as hopes for
stimulus plan was reinforced after official estimates showed
the economy was expanding at its slowest pace in six years.

Reliance Industries (RELI.BO) led the gains on strong
institutional interest as the energy giant gets ready to sell
gas by March from its huge fields off India's east coast.

Banks and infrastructure-related companies rose on
expectations the government would unveil measures to boost
growth in its interim budget on Feb. 16.

"We could possibly see a rate cut or other measures," said
Amit Khurana, head of institutional equities at Collins
Stewart. "The market is already anticipating that."

The main 30-share BSE stock index closed up 3.04
percent, or 283.03 points, at 9,583.89, after rising as much as
3.2 percent at one point. Twenty-nine of its components rose.

The government forecast the economy to expand 7.1 percent
in the year ending in March, well below 9 percent in 2007/08,
boosting expectations for fresh government stimulus measures.

Final growth figures for the year could be significantly
weaker, analysts said, as the global slowdown and high
borrowing costs batter demand for everything from manufactured
goods and automobiles to new homes. [ID:nDEL302409]

"These are advance estimates and can be revised down later
once more data are available," said Sonal Varma at Nomura in
Mumbai, echoing views of other economists who felt the
preliminary full-year figure was too optimistic.
"Our estimate for fiscal year 2010 GDP growth is 5.3 percent,
and we expect the RBI (Reserve Bank of India) to cut both the
repo and reverse repo rates by 50 basis points before March
2009 and cumulatively by 150 basis points before mid-2009."

Tata Steel (TISC.BO), the world's sixth-largest steel
maker, rose 7.2 percent to 199.55 rupees after January steel
sales from its Indian operations bounced back sharply, up 26
percent from a year earlier.

Last month, its standalone December quarter net profit had
slumped 56 percent amid slowing demand. [ID:nBOM399965]

Rate cut hopes boosted financials on expectation of higher
treasury income as bond prices rise. Top lender State Bank of
India (SBI.BO) rose 2.6 percent to 1,147.55 rupees, ICICI Bank
(ICBK.BO) gained 5.2 percent to 428 and HDFC Bank (HDBK.BO)
added 2.3 percent to 919.10 rupees.

Mortgage lender Housing Development Finance Corp (HDFC.BO)
rose 5.6 percent to 1,491.15 rupees amid market talk it, along
with ICICI Bank, could cut lending rates to prevent customers
from moving to state-run banks.

"The RBI is poised to cut rates further, though the pace
might slow. We expect another 100 basis point cut in policy
rates in the current quarter and potentially another 100 basis
point in early second quarter 2009," Macquarie Research said in
a note on Friday.

Top-listed Reliance Industries rose 3.4 percent to 1,389.05
rupees, on hopes for a revenue boost from gas sales next month,
and exports from its new refinery, which start in April.

Construction stocks climbed as investors bet higher
government spending to boost the economy would boost prospects
for these firms.

Leading engineering firm Larsen & Toubro (LART.BO) rose 5.6
percent to 674.40 rupees, Reliance Infrastructure (RLIN.BO)
added 6.8 percent to 577.50 rupees and Jaiprakash Associates
(JAIA.BO) gained 8.5 percent at 74.80 rupees.

In the broader market, advances led declines in the ratio
of 1.7:1 on moderate volume of 288 million shares.

The 50-share NSE Index ended up 2.7 percent at
2,919.90 points, its highest close since Jan. 9.

STOCKS THAT MOVED

* Kingfisher Airlines (KING.BO) rose 8.3 percent to 35.25
rupees on media reports it was aiming to raise 20 billion
rupees through a stake sale to strategic investors. The company
later said it has been approached by potential investors, but
did not give details.

* Nagarjuna Construction Co Ltd (NGCN.BO) rose 8.9 percent
to 50.60 rupees after the company said it won four contracts
worth 7.12 billion rupees. [ID:nBMB004629]

* Drugmaker Piramal Healthcare (PIRA.BO) fell 1 percent to
192.55 rupees, after rising nearly 25 percent on reports
GlaxoSmithKline Plc (GSK.L) and Sanofi Aventis SA (SASY.PA)
have emerged as bidders for the company. Piramal denied the
reports [ID:nBOM369216].

MAIN TOP 3 BY VOLUME

* Wire and Wireless (WIWI.BO) on 14.5 million shares

* GVK Power & Infrastructure (GVKP.BO) on 12.7 million
shares

* Satyam Computer (SATY.BO) on 10.8 million shares

FACTORS TO WATCH
* Indian rupee near intraday peaks, stocks help
[INR/]
* Indian bond yields up as supplies eyed
[IN/]
* Yen rises broadly; US bank plan delay disappoints
[FRX/]
* US stimulus delays weigh, but emerging stocks up
[MKTS/GLOB]
* Oil over $40 as stimulus balances weaker stocks
[O/R]
* US stock futures dip; stimulus, bank rescue plans eyed
[.N]
* For closing rates of Indian ADRs
INADR
(Editing by Ranjit Gangadharan)