Indian shares rise in choppy trade; ITC, Larsen up

* Concerns about govt finances keep investors wary

* BSE index up 0.8 pct after flip-flopping

* ITC jumps more than 8 pct, Larsen firms 2.5 pct
(Updates to late morning)

BANGALORE, July 7 (Reuters) - India's main stock index was
trading up more than 1 percent on Tuesday, pulling back from
its biggest one-day drop in six months a day earlier after the
annual budget disappointed investors.

Trading was, however, choppy with the index slipping into
the negative briefly as concerns about the government's
finances weighed.

Leading cigarette maker ITC Ltd (ITC.BO), ICICI Bank
(ICBK.BO) and engineering and construction major Larsen and
Toubro (LART.BO) led the gains.

Bharti Airtel (BRTI.BO) gained 2.7 percent to 805 rupees
after the market regulator said India's leading mobile operator
was considering issuing global depositary receipts to South
Africa's MTN (MTNJ.J). [ID:nBMA003289]

The two companies have been in exclusive talks that could
lead to a merger creating the world's No. 3 wireless group with
more than 200 million subscribers and combined revenue of $20
billion.
At 11:27 a.m. (0557 GMT), the 30-share BSE index .BSESN was
up 0.78 percent, or 109.57 points, at 14,152.97, with 17 stocks
rising. The index rose as much as 1.5 percent in the opening
deals and then fell 0.3 percent into the negative.

Analysts said some foreign investors were buying front-line
stocks on hopes the government will continue with key reforms
despite not spelling out a clear roadmap in the budget.

"The budget content was not as bad as it was made out to
be," Samir Arora, who manages nearly $200 million in Indian
equities at Singapore-based fund Helios Capital, said. "I have
a positive bias on the market and waiting for the things to
happen."

Investors had betted on a market-friendly budget after
Prime Minister Manmohan Singh's ruling coalition was re-elected
in mid-May with a bigger mandate.

The main stock index fell 5.8 percent on Monday after the
budget fell short of expectation on infrastructure spending,
ignored financial sector reforms, raised a minimum alternate
tax for companies and set a paltry stake sale target, traders
said.

Citigroup said Monday's sharp fall was a result of factors
like fairly high expectations on investments, taxes and policy
impetus.

"While we believe expectations weren't specific enough and
were in nature fairly generalised, the lack of big bold policy
and investment announcements probably came as a
disappointment," it said in a report.

"We don't believe there are any fundamental shortcomings of
the budget on this count -- just a possible let-down against a
backdrop of high expectations."

The BSE index is up about 47 percent so far this year,
after a three-quarters rally from its 2009 low in early March,
and analysts said some institutions might have used the budget
disappointment as a trigger to consolidate their portfolio.

ITC was trading up 6.7 percent at 211 rupees, after having
climbed 8.6 percent to its highest in more than a year.

Bank of America-Merrill Lynch said it had upgraded its EPS
estimates for ITC by 3 percent in this fiscal year and 4
percent in the next year after the budget left excise duty on
cigarettes unchanged versus its forecast of a 5 percent
increase.

Shares in Larsen rose 2.5 percent to 1,501.10 rupees, after
the budget increased spending to infrastructure sectors,
traders said. The stock had dropped nearly 9 percent on Monday.

The trend was negative in the broader market with losers
overwhelming gainers by almost 2 to 1 on relatively moderate
volume of 135 million shares.

The broader 50-share NSE index was up 0.78 percent
at 4,198.05.

MAIN TOP 3 STOCKS BY VOLUME

* Unitech Ltd (UNTE.BO) on 7 million shares

* Suzlon Energy (SUZL.BO) on 6 million shares

* IFCI Ltd (IFCI.BO) on 5 million shares

STOCKS ON THE MOVE

* Energy giant Reliance Industries (RELI.BO), which has the
highest weighting in the main index, fell 2.4 percent to 1,848
rupees. Citigroup said a rise in minimum alternate tax in the
budget was negative for Reliance.

* Mid-cap IT services firms such as MphasiS (MBFL.BO),
Patni Computer Services (PTNI.BO) and Mindtree (MINT.BO) rose
between 2 and 4 percent after the budget extended the tax
holiday on units located in software technology parks by one
year to FY2011.
Analysts say the extension would benefit smaller IT services
firms more than the large companies such as Infosys
Technologies (INFY.BO) and Tata Consultancy Services (TCS.BO).

FACTORS TO WATCH
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* For closing rates of Indian ADRs
INADR
(Reporting by Sumeet Chatterjee; Editing by Ranjit
Gangadharan)