Indian shares gain 2.5 pct as political risk eases

* Post 10th weekly rise in best run in 2-½ yrs

* Election results on Sat; one of two main coalitions
likely

* Potentially unstable Third Front seen receding

* Reliance, ICICI, Bharti lead gains
(Updates to close)

By Pratish Narayanan

MUMBAI, May 15 (Reuters) - Indian shares snapped a two-day
fall and rose 2.5 percent on Friday, lifting the market to a
tenth successive weekly gain for the first time in 2-½ years,
on easing signs of political risk.

The market was bolstered by hopes one of the main two
national coalitions will be able to form the next government
after general election results are released on Saturday.

A new exit poll indicated the ruling Congress-led United
Progressive Alliance (UPA) may get 216 seats, 40 seats more
than the main opposition Bharatiya Janata Party-led National
Democratic Alliance (NDA). [ID:nISL88309]

This doused fears a potentially unstable Third Front
comprised of regional parties and the communists may gain
power.

"With the UPA and NDA together expected to garner close to
400 seats, possibility of a Third Front government reduces
significantly," Siddhartha Sanyal, an analyst at Edelweiss
Securities, said.

"Even with all possible combinations ... the Third Front
will find it difficult to come close to the magic figure of
272," he said, referring to the number of seats needed to gain
a majority in parliament.

The market had fallen more than 2 percent over the past two
sessions as investors worried a weak coalition would face
hurdles to push reforms needed to boost slowing economic growth
and cut a growing fiscal deficit.

The 30-share BSE index .BSESN rose 2.53 percent, or
300.51 points, to 12,173.42, its best close in more than seven
months, with 25 stocks gaining. It rose 2.5 percent on the
week, matching a 10-week winning streak between July and
September 2006.

Private-sector lender ICICI Bank (ICBK.BO), energy giant
Reliance Industries (RELI.BO) and top telecoms firm Bharti
Airtel (BRTI.BO) led the gains.

"We expect the market to be more volatile during the period
of formation of the government, post the results," Ajay Parmar,
head of research at Emkay Research, said.

"However, once the government is formed, the market will
start focusing on fundamentals of the economy, monetary and
fiscal policies, various scenarios in industries and corporate
earnings, and it will also take a cue from the global market."

A coalition led either by the Congress or the BJP will be
seen as a positive because they can both provide the impetus to
boost sagging growth.

The market has soared more than 50 percent from a 2009 low
in early March, as foreign funds pumped in about $1.5 billion
in April and more than $1.8 billion in April. This has helped
the main index rise 26 percent this year after plunging by more
than half in 2008.

Strong markets across Asia on Friday following a rise on
Wall Street overnight also helped sentiment, traders said.
Japan's Nikkei .N225 rose 1.9 percent, while MSCI's measure
of other Asian markets .MSCIAPJ gained 1.6 percent.

Reliance Industries, which has the biggest weight in the
main index, rose 2.1 percent to 1,948.25 rupees. ICICI Bank
climbed 7 percent to 574.45 rupees, while Bharti Airtel
advanced 4.7 percent to 799.80 rupees.

Oil & Natural Gas Corp (ONGC.BO) fell 2.3 percent to 812.95
rupees, after the Economic Times said the state-run explorer
could report a drop in 2008/09 profit as the federal government
plans to ask it to bear a bigger subsidy burden to compensate
state fuel retailers who sell fuel at state-set low prices.

In the broader market, gainers led losers 1,479 to 1,068 on
relatively light volume of 405.3 million shares.

The 50-share NSE index ended the day up 2.2 percent
at 3,671.65 points.

MAIN TOP 3 BY VOLUME

* Cairn India Ltd (CAIL.BO) on 19.5 million shares

* Unitech (UNTE.BO) on 17.1 million shares

* Suzlon Energy (SUZL.BO) on 11.4 million shares

STOCKS THAT MOVED

* Zuari Industries Ltd (ZURI.BO) rallied 6.2 percent to
214.90 rupees after the fertiliser maker said net profit for
the year ended March 2009 rose 27 percent.

* Tata Tea Ltd (TTTE.BO), Harrisons Malayalam (HRMA.BO) and
Jayshree Tea & Industries Ltd (JYST.BO) rose 1-6 percent after
media reports said regional and national tea marketing
companies decided to raise prices by 20 rupees per kg on a
supply shortfall in major producing regions.

* Battery maker Eveready Industries India Ltd (ERDY.BO)
rose 5.9 percent to 26.90 rupees after the company said late on
Thursday it plans to acquire 80 percent of France-based battery
maker Uniross SA through an overseas joint venture.

FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* India rupee pares gains on poll uncertainty; stx
[INR/]
* Indian bond yields up; poll results awaited
[IN/]
* Yen jumps broadly; weak German data dents euro
[FRX/]
* Oil edged higher towards $59, equities support [O/R]
* Stocks rise despite slumping German GDP [MKTS/GLOB]
* US futures point to higher Wall Street open

[.N] * For closing rates of Indian ADRs

INADR (Editing by Ranjit Gangadharan)