* NSE index up 0.9 pct, BSE index up 1 pct
* Market fundamentals look decent - analyst
* Allahabad Bank, Corporation Bank, Dhanlaxmi Bank up as RBI takes them off PCA list
By Krishna V Kurup
Feb 27 (Reuters) - Indian shares rose on Wednesday, led by index heavyweights, as fears about escalation of a conflict with Pakistan abated a day after India said it launched air strikes in its neighbouring country.
Market took some cues from Asian shares, which inched towards a five-month high, after Federal Reserve Chairman Jerome Powell reinforced the U.S. central bank’s shift to a more “patient” approach on policy in the face of a slowing economy.
The broader NSE index rose 0.9 percent to 109,32.50 as of 0523 GMT, while the benchmark BSE index gained more than 1 percent to 36,350.11.
“Today, it is a continuation of the rally before yesterday’s knee-jerk reaction as market fundamentals look decent,” said Neeraj Dewan, director at Quantum Securities.
“Market reacted yesterday only because of panic after the Indian Air Force attack. Through the day, we saw that there is a chance it may not get escalated as it was limited to attacking terror camps and there was a feeling that the situation will not deteriorate.”
On Tuesday, the NSE index lost 0.4 percent, while the BSE index shed 0.7 percent, as the news of a growing conflict between the two nuclear-armed nations spooked investors.
The NSE index had risen for four straight sessions before Tuesday’s fall.
India on Tuesday said its warplanes killed “a very large number” of fighters when they struck a militant training camp inside Pakistan, although Pakistan officials rejected India’s comments that it had struck a “terrorist camp” inside Pakistan, warning that they would retaliate.
Reliance Industries Ltd and ICICI Bank Ltd drove most gains on the NSE index, rising 1.8 percent and 1.6 percent, respectively.
Shares in state-owned Allahabad Bank, Corporation Bank and privately-held Dhanlaxmi Bank surged after the central bank pulled them off of its prompt corrective action list.
Corporation Bank hit its highest since June 13, rising as much as 10.4 percent.
Software services provider Wipro Ltd lost as much as 2.4 percent after brokerage Credit Suisse downgraded the stock and cut the target price. (Reporting by Krishna V Kurup in Bengaluru; Editing by Shreejay Sinha)