* BSE index gains 0.16 pct, NSE index up 0.17 pct
* Analysts say cautious on outperformers
* FIIs buy about $2 bln in last 20 sessions
MUMBAI, March 14 (Reuters) - Indian shares edged higher on Friday as strong buying by foreign investors boosted blue-chips such as Larsen & Toubro and kept both indexes not too far from their record highs, although some caution was setting in about the pace of recent gains.
Foreign investors have been driving the rally in Indian shares, despite concerns in global markets over the outlook for China's economy and continued military tensions in Ukraine.
Overseas funds were net buyers of $148.6 million worth of shares in primary and secondary markets on Thursday, marking a 19th buying session in the previous 20 for a total of more than $2 billion.
Analysts attributed the strong foreign flows to hopes about easing inflation and an improving domestic economy.
Data on Friday showed wholesale price inflation eased to a nine-month low of 4.68 percent in February, while reports earlier this week showed a sharp easing in consumer inflation and a slight uptick in industrial output.
But investors are also booking profit in some of the recent gainers, with the BSE index and the NSE index ending the week with mild losses, thus snapping a three-week winning streak.
"I expect markets to trade volatile in the near-term and global factors will mainly affect markets. Since it (markets) moved so sharply, I feel there is limited upside left at this level. And we do have serious downside risks. We are recommending our clients to book profits on those stocks which have moved sharply," said Daljeet S Kohli, head of research at brokerage, India Nivesh.
The benchmark BSE index rose 0.16 percent, or 35.19 points, to end at 21,809.80 points, not far from a record high of 22,023.98 points hit on Monday. It fell 0.5 percent for the week.
The broader NSE index added 0.17 percent to 6,504.20 points, off an all-time high of 6,562.85 hit on Tuesday. The index fell 0.34 percent for the week.
Domestic economy-driven blue-chips led the gainers, with Larsen & Toubro Ltd up 2.4 percent, while Bharat Heavy Electricals Ltd rose 2.7 percent.
Among other gainers, Infosys Ltd rose 1.1 percent after investors gauged its 8.5 percent fall on Thursday as overdone. Shares were hit in the previous session after chairman Chairman Narayana Murthy said revenue for the fiscal year ending March could grow at the lower end of the company's 11.5 to 12 percent projection.
Shares in Sun Pharmaceutical Industries gained 1.59 percent, recovering some of its 5.2 percent fall on Thursday after the U.S. Food and Drug Administration (FDA) banned imports from one of the drug-maker's plant.
However, investors also booked profits in recent strong gainers. IndusInd Bank fell 0.2 percent, but still ended up 11.5 percent for the week. Kotak Mahindra Bank Ltd fell 1.1 percent but rose 6.2 percent for the week.
Axis Bank Ltd fell 1.9 percent after a government official said India is aiming to raise 30-40 billion rupees ($490.68-$654.24 million) via the sale of a stake held by a state-run trust fund in the bank.
Shares in L&T Finance Holdings closed 6.25 percent lower after the non-banking financial company set a floor price for its stake sale at 70 rupees per share, or an 11.5 percent discount to Thursday's closing price..
For additional stocks on the move double click
FACTORS TO WATCH * Yen in vogue on renewed anxiety over Ukraine, China * Oil steady above $107 on Ukraine tension * Ukraine anxiety triggers flight to safety, stocks tumble * Foreign institutional investor flows * For closing rates of Indian ADRs
ASIA-PACIFIC STOCK MARKETS: Pan-Asia........ Japan....... S.Korea... S.E. Asia....... Hong Kong... Taiwan.... Australia/NZ.... India....... China.....
OTHER MARKETS: Wall Street .... Gold ....... Currency.. Eurostocks..... Oil ........ JP bonds... ADR Report ..... LME metals. US bonds.. Stocks News US.. Stocks News Europe
DIARIES & DATA: Indian Data Watch Asia earnings diary U.S. earnings diary European diary Indian diary Wall Street Week Ahead Eurostocks Week Ahead
For top Asian company news, double click on:
U.S. company news European company news
Forex news Global Economy news
Technology news Telecoms news
Media news Banking news
Politics/General Asia Macro data ($1 = 61.1400 Indian rupees) (Reporting by Indulal PM; Editing by Sunil Nair)