Indian shares hit 1-wk highs; banks, Reliance lead

* Firm Asian markets help sentiment

* Bank recover as no move yet to tighten liquidity

* Reliance extends gain on Tuesday gas discovery
announcement

(Updates to morning)

MUMBAI, Dec 23 (Reuters) - Indian shares rose smartly to
one-week highs on Wednesday morning, with financials leading
the market to its highest in a week as sentiment was supported
by a rise in Asian markets and the lack of any policy
tightening.

Leading lender State Bank of India (SBI.BO) rose 0.7
percent to 2,181.30 rupees and ICICI Bank climbed 1.9 percent
to 842 rupees, although both stocks are still down in December.

"People were expecting that RBI (Reserve Bank of India) may
tighten liquidity after the inflation data. But that has not
happened as yet. So the bank stocks are just recovering," said
Daljeet Kohli, head of private client group at Emkay Global.

At 10:58 a.m. (0528 GMT), the 30-share BSE Index .BSESN
was trading up 1.12 percent at 16,879.66, with only three of
its components declining. It later extended gains to 1.8
percent.

"It is just bouncing back after the recent consolidation,
with positive global cues helping it," said Hitesh Agrawal,
head of research at Angel Broking.

"From the long-term view, we all know India is a good
story," he added.

Energy giant Reliance Industries (RELI.BO) was up 1.7
percent at 1,036.30 rupees. The company said on Tuesday it had
made a gas discovery in one of its exploration blocks in the
Krishna Godavari basin off the country's east coast.
[ID:nBMB009291]

"While we await the regulator's decision on commerciality
of the discovery, we believe this discovery reiterates the
exploration upside potential of RIL from eastern India
offshore," Goldman Sachs said in a note.

"Going into 2010, we expect more news flow to come from
RIL's other exploration blocks, as two more rigs add to RIL's
current count of three in India," the note said.

Metals stocks extended Tuesday's gains on strong demand
outlook for metals in 2010.

Tata Steel (TISC.BO) rose 1.9 percent, while Sterlite
Industries (STRL.BO) and Hindalco (HALC.BO) climbed 2.3 percent
and 1.4 percent respectively.

In the broader market, gainers were nearly four times the
number of losers on a volume of 125 million shares.

The 50-share NSE index .NSEI was up 1.1 percent at 5,042.

STOCKS ON THE MOVE

* Software companies such as Wipro (WIPR.BO), Tata
Consultancy (TCS.BO) and Infosys Technologies (INFY.BO) were up
0.8-2.2 percent on an improving global recovery outlook.

* Jindal Saw (JIND.BO) was up 1.75 percent at 186.10
rupees. The pipe maker said on Tuesday it won orders worth more
than 11 billion rupees to supply steel and iron pipes.
[ID:nBMB009295]

MAIN TOP 3 BY VOLUME

* Suzlon Energy (SUZL.BO) on 4.3 million shares

* NHPC (NHPC.BO) on 3.9 million shares

* Unitech (UNTE.BO) on 2.6 million shares

FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* Indian rupee report [INR/]
* Indian bond report [IN/]
* Dollar holds firm as yields attract, yen sags [FRX/]
* Oil dips towards $74 on firm dlr; U.S. data supports [O/R]
* Asian shares edge up, dollar off highs [MKTS/GLOB]
* Wall St advances on optimism about housing sector [.N]
* For closing rates of Indian ADRs INADR
(Reporting by Ami Shah; Editing by John Mair)