Indian shares rise 1 pct; Jaiprakash jumps 6 pct

(Updates to late morning)

* Reliance Ind rise for a second day on hopes of better
output

* Automakers down on slowing car sales

NEW DELHI, Sept 7 (Reuters) - Indian shares rose 1 percent
on Wednesday, taking cues from firmer Asian peers and led by
energy major Reliance Industries and lenders HDFC Bank
and ICICI Bank .

Cement and construction firm Jaiprakash Associates
jumped 6 percent on a newspaper report it was in talks to sell
up to 26 percent stake in its cement business to Mexico's Cemex
and South America's Votorantim Group.

A spokesman for Jaiprakash Associates said he did not have
an immediate comment.

At 11:49 a.m. (0619 GMT), the benchmark 30-share BSE index
was trading up 1 percent at 17,032.99 points, with 23
of its components in the positive territory.

Reliance Industries, which has the heaviest weight on the
main index, climbed for a second day on expectations the energy
major will be able to step up flagging gas output off the
country's east coast.

The stock was trading up 1.25 percent at 831.80 rupees.

A. Balasubramanian, chief investment officer at Birla
Sunlife, said investors were realising beaten-down Indian
shares, which are among the biggest losers this year, were
attractive bets in a gloomy global environment.

Foreign funds have bought shares worth $449 million this
month after selling about $2 billio n in August.

Still, the outlook remained cloudy.

"Nothing has changed fundamentally for India in the past few
days. It's just a pullback rally," Deven Choksey, managing
director at K. R. Choksey, said.

Top lender State Bank of India and rivals ICICI and
HDFC Bank were up between 1 percent and 2.5 percent.

"There is a talk that banks may gain weightage on MSCI
indices. There is also a feeling that market has already
factored in another 25 bps rate hike," said Ambareesh Baliga,
COO at brokerage Way2Wealth.

He said a higher weightage would prompt investors tracking
MSCI indices to rebalance their portfolio and lead to more
trading in these shares.

The 50-share NSE index was up 1.09 percent. In the
broader market, there were four gainers for every declining
stock on a total volume of about 310 million shares.

Arun Kejriwal, strategist at research firm KRIS, said if
Europe opened lower the market could turn lower.

Most car makers were trading down with BSE auto index
losing about 0.35 percent. Tata Motors fell
as much as 1.25 percent after UBS cut its target price to 770
rupees from 920 rupees and reiterated its 'sell' on the stock.

Software services bellwether Infosys dropped
about one percent, highlighting concerns about the risk European
debt crisis posed to India's showcase $76-billion IT industry.

The BSE index, which is down more than 17 percent this year,
as rising interest rates and worries about the health of global
economy led investors to pare exposure to risky assets.

Morgan Stanley had earlier this month pared its growth
forecast for India to 7.2 percent in 2011/12 from 7.7 percent
earlier.

At 0552 GMT, the MSCI's measure of Asian markets other than
Japan was up 2.34 percent, while Japan's Nikkei
gained 1.91 percent.

Wall Street fell for a third day on Tuesday on fears Europe
still has failed to tackle its debt crisis, prompting worries
the market is headed to new lows for the year.

STOCKS ON THE MOVE

* Shree Renuka Sugars , Bajaj Hindusthan ,
Balrampur Chini Mills and Simbhaoli Sugars
rose 4-6 percent after global sugar prices rose to a 3-1/2-month
high on Tuesday.

* Syndicate Bank rose about 3 percent after a
newspaper report said Aviva Life Insurance Company India, a
local arm of the UK insurer Aviva , may sell as much as 30
percent stake to the state-run Indian bank.

* Kalindee Rail Nirman Engineers Ltd rose about 8
percent after it received contract for about $15 million from
Bangladesh Railway.

TOP 3 BY VOLUME

* Jaiprakash Associates on 12.34 million shares

* Unitech on 8.92 million shares

* IFCI on 8.70 million shares
(Reporting by Sanjeev Choudhary; Editing by Ranjit Gangadharan)

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