European shares rebound, Portugal underperforms
* Stock markets bounce back; banks, miners among top gainers
* Portugal bourse falls on court challenge to austerity cuts
* FTSEurofirst 300 and Euro STOXX 50 rise 0.7 pct
LONDON, April 8 (Reuters) - European shares clawed back some of the previous session's hefty losses on Monday, led by a rise in pharma group Novartis, but gains were expected to be limited this month by concerns over the region's sovereign debt crisis.
The pan-European FTSEurofirst 300 index, which fell 1.6 percent on Friday, bounced back to rise 0.7 percent to 1,169.77 points. The euro zone's blue-chip Euro STOXX 50 index also advanced 0.7 percent to 2,602.78 points.
Novartis rose 1.8 percent to add the most points to the FTSEurofirst 300 index, an increase which traders attributed to Bank of America Merrill Lynch raising its rating on Novartis to "neutral" from "underperform".
Traders said another reason for the rise in European equity markets was investors buying stocks for relatively cheap prices after the fall at the end of last week.
Many investors have kept a long-term bullish outlook on equities, which are offering better returns than cash and bonds and are expected to rise gradually over the course of 2013 as the global economy recovers.
"We stay bullish on European equities despite regional macro risks," Citi strategists wrote in a research note.
However, the outlook for European equities this month was more cautious.
Worries over the euro zone's debt problems - which resurfaced last month after inconclusive elections in Italy - were heightened when Portugal's constitutional court rejected some of the austerity measures introduced as a condition of the country's bailout.
The political uncertainty in Lisbon caused Portugal's benchmark PSI 20 equity index to underperform the gains elsewhere in Europe, with the Lisbon market falling 1.1 percent.
Clairinvest fund manager Ion-Marc Valahu said he had a "short" position to bet on further falls on the European equity markets in the coming weeks.
"I am expecting the European equity markets to consolidate on worsening conditions," he said.
Berkeley Futures associate director Richard Griffiths also expected European equity markets to make little progress this month.
He said the German DAX equity index could fall 3 percent in April, and that he would look to buy "puts" - options used to bet on a market fall - and sell futures on any rallies.
UBS wrote in a research note that its clients had also turned more cautious, following a solid start to 2013 during which the FTSEurofirst 300 has risen about 3 percent so far.
The FTSEurofirst 300 has slipped back by around 1.6 percent since the start of April, and UBS said its clients had changed position to start selling off equity holdings in March.
"UBS clients were net sellers of equities during the month of March. In fact, clients have been net selling for 4 consecutive weeks. This marks a shift from the first 2 months of the year, during which UBS clients were net buyers of 7 of 8 weeks," wrote the UBS equity strategists.