Indian shares rise 2nd day, but outlook cautious

* Financials lead on hopes of better loan demand

* Jaiprakash rallies as Aug cement dispatches up 51 pct
(Updates to close)

By Ami Shah

MUMBAI, Sept 2 (Reuters) - Indian shares nudged higher for
a second day on Thursday as strong U.S. manufacturing data
eased some concerns about the pace of global economic recovery,
but investor confidence was brittle.

Financials topped the gainers on hopes an expanding economy
will boost demand for loans, and help boost earnings. Auto
makers and cement producers that saw higher August sales also
climbed.

The 30-share BSE index .BSESN ended up 0.18 percent, or
32.44 points, at 18,238.31, with 18 components advancing.
Trading was choppy, with an early rise of 0.8 percent
triggering profit-taking and sending the index briefly into
negative territory.

"I think the market is now in a zone where it is better to
be cautious," said Om Ahuja, head of private wealth management
and strategy at Emkay Global.

India's economy grew at its fastest pace in nearly three
years in the June quarter on strong manufacturing growth and
better farm output, but there were doubts whether the annual
8.8 percent rate of expansion can be sustained. [ID:nSGE68002H]

Foreigners have moved $12.9 billion into Indian equities
this year and helped the benchmark index gain 4.4 percent. The
market has outperformed emerging market peers such as Brazil's
Bovespa .BVSP, Russia's RTS index .IRTS and China's
Shanghai Composite Index .SSEC.

Brazil and China's indexes have shed 2.2 percent and nearly
19 percent respectively in the year to date, while the Russian
benchmark has edged up 0.8 percent.

In 2009, the BSE index had jumped 81 percent on record
foreign portfolio inflows of $17.5 billion. The relatively
small rise this year has been due to inconsistent flows and a
belief that many stocks are too pricey.

"It is not advisable to deploy fresh money right now.
Booking profits is a better idea," Ahuja said.

Leading private-sector lenders ICICI Bank (ICBK.BO) and
HDFC Bank (HDBK.BO) climbed 0.8 percent and 1.5 percent
respectively.

Mortgage lender Housing Development Finance Corp (HDFC.BO)
rose 1.5 percent while leading lender State Bank of India
(SBI.BO) dropped 0.7 percent.

Jaiprakash Associates (JAIA.BO) rose 4.3 percent, the
biggest one-day gain in more than three months, after its
August cement dispatches jumped 51 percent. [ID:nWNAS9289]

Tata Motors (TAMO.BO) gained 0.8 percent, while Maruti
Suzuki (MRTI.BO) rose 0.2 percent on robust August sales.
[ID:nSGE6800IE]

A normal monsoon season, improving consumer sentiment and
an overall recovery in the economy should benefit auto sales,
Macquarie analyst Sanjay Doshi said in a note.

"We expect sales numbers to remain healthy at least until
the festive season, as inventory levels are below average," he
wrote.

Tata Motors, the country's largest truck maker that also
makes cars, including the Nano and Jaguar and Land Rover, plans
to invest $641 million every year for the next three years, its
chairman said on Wednesday. [ID:nBMA008369]

Top motorcycle maker Hero Honda HROH.BO, however, fell
3.4 percent as its August two-wheeler sales rose by only 2
percent. [ID:nBMA008371]

Energy giant Reliance Industries (RELI.BO) ended up 0.1
percent at 937.15 rupees after rising as much as 1.2 percent
early. HSBC Securities cut its target price on the energy major
to 1,058 rupees from 1,186, while maintaining a "neutral"
rating on the stock. [ID:nBMA008378]

Advancing shares overwhelmed declining ones in a ratio of
1.8:1 on relatively lower volume of 411 million shares.

The 50-share NSE index .NSEI firmed 0.3 percent to
5,486.15.

At 1024 GMT, the MSCI world equity index .MIWD00000PUS
rose 0.2 percent, while the more volatile emerging markets
index .MSCIEF climbed 0.5 percent.

STOCKS THAT MOVED

* Bajaj Auto (BAJA.BO) raced 1.3 percent to 2,784.50
rupees, as the second-largest motorcycle maker said its August
auto sales rose 55 percent. [ID:nBMA008380]

* Reliance Broadcast Network (REBN.BO) rose 5 percent to
116 rupees after its board approved raising over 4 billion
rupees through an issue of equity shares to its founder and
other investors. [ID:nBMA008375]

* Koutons Retail India Ltd (KRIL.BO) gained 1.3 percent to
309.80 rupees after it said its board would meet on Sept. 4 to
consider raising funds through issue of shares to the public or
to qualified institutional buyers. [ID:nBMB011401]

MAIN TOP 3 BY VOLUME

* Suzlon Energy (SUZL.BO) on 12.7 million shares

* Piramal Healthcare (PIRA.BO) on 12.5 million shares

* Ispat Industries ISPT.BO on 10.6 million shares

FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* India rupee report
[INR/]
* India bond report
[IN/]
* Dollar, yen recover losses; ECB eyed
[FRX/]
* Oil steady near $74 as investors eye U.S. jobs reports
[O/R]
* Stocks hit 2-wk high on manufacturing optimism
[MKTS/GLOB]
* Futures point to Wall St edging lower; data eyed
[.N]
* For closing rates of Indian ADRs
INADR
(Editing by Ranjit Gangadharan)