Mexican peso firms, helped by bond index bets

* Peso outperforms EM, holds below key 13 level

* Bond index inclusion bets back currency

* Grupo Mexico shares gain on court ruling on strike (Recasts, adds comments and closing stock prices)

MEXICO CITY, Feb 12 (Reuters) - Mexico's peso firmed on Friday as investors bet local assets will continue to gain ahead of a possible inclusion of Mexican bonds in a major global index run by Citigroup, which could spur further flows into Mexico.

The peso MXN=MEX01 gained 0.14 percent to 12.942 per U.S. dollar, outperforming other emerging market assets that lost ground.

The IPC stock index .MXX closed up 0.52 percent at 31,995.74, boosted by gains in Grupo Mexico on news a court ruled in the miner's favor in a long-standing labor dispute.

Mexico is preparing to launch later this month a syndicated offer of a 10-year peso bond and the government said on Thursday that local debt could soon be included in Citigroup's World Government Bond Index (WGBI). For details see [ID:nN11117955]

Inclusion in the index would boost flows into Mexico as other bond investors, who use the WGBI as a benchmark, buy up Mexican bonds.

"With this, we expect to see some foreign investment," said a trader in Mexico City.

Many analysts are betting that Mexico could keep outperforming other emerging markets as improving exports to the United States help it pull out of a deep recession. Data on Friday showed U.S. retail sales rose more than expected in January. [ID:nN11214682]

"Positioning for the syndicated bond offer continues, helped by the better-than-expected data on retail sales in the United States," said Pedro Tuesta, an analyst at 4Cast in Washington.

The yield on Mexico's 10-year bond MX10YT=RR bid up 3 basis points to 7.63 percent following a rally to a nine-month low on Thursday's news of Mexico's possible inclusion in the Citigroup bond index.

"Support to Mexican long-end yields could continue on the back of speculation for WGBI entry, especially if Citigroup makes official Mexico's admittance soon," Barclays analysts Matthew Huang and Roberto Melzi wrote in a report.

In stock trading, shares in Grupo Mexico (GMEXICOB.MX) rose 2.46 percent to 29.56 pesos after a court ruled in its favor in a labor dispute that has shuttered its major copper mine for more than two years. [ID:nN1133737]

Shares in top retailer Wal-Mart de Mexico (WALMEXV.MX) rose 2.39 percent to 59.18 pesos. After the market close on Thursday, Walmex, as the company is known, posted a 16 percent rise in fourth-quarter net profit. [ID:nN11197694] (Reporting by Michael O'Boyle; Editing by Dan Grebler)