Indian shares bounce 3.4 pct as optimism returns

* Monsoon seen improving, sentiment up

* ICICI Bank, Reliance Industries, HDFC lead gainers

* Global rally, upbeat Singapore, Australia econ data help

* Shares to track international markets in near term
(Adds closing prices, analyst comments, details, European
markets performance)

By Pratish Narayanan

MUMBAI, July 14 (Reuters) - Indian shares rebounded 3.4
percent on Tuesday after four straight falls, riding a global
rally as encouraging economic data in Asia and optimism on the
financial sector from a prominent U.S. analyst boosted
confidence.

Private-sector lender ICICI Bank (ICBK.BO), energy giant
Reliance Industries (RELI.BO), and top mortgage lender Housing
Development Finance Corp (HDFC.BO) led the gains in the main
index, a day after it fell to its lowest close in two months.

Bullish comments on the financial sector's performance from
Meredith Whitney, who made her name by predicting much of the
carnage in the sector, raised hopes U.S. banks' quarterly
results may be stronger than expected, lifting sentiment
worldwide.

In Asia, trade-hub Singapore's economy grew at an annual
rate of 20.4 percent in the second quarter, ending a recession
after four consecutive quarters of contraction. A key measure
of business conditions in Australia jumped to its best level in
nine months in June. [ID:nSYU006845] [ID:nSIN495166]

India's 30-share BSE index .BSESN ended up 3.38 percent,
or 453.38 points, at 13,853.70, its best close in a week, after
rising as much as 3.75 percent during trade. All but one stock
advanced.

Monsoon rains, crucial for India's domestic demand-led
economy, had made a weak start in June and early July,
triggering worries that a nascent economic recovery may be
undermined.

The Meteorological Department said in a forecast on its
website on Tuesday that "heavy to very heavy" rain would fall
at many regions across India over the next 48 hours, as rains
lashed Mumbai and led to minor flooding in several parts of the
country's financial capital.

"The monsoon rains are looking better than what they were
over the past three or four days, and with world markets also
gaining, confidence is up," Ambareesh Baliga, vice president at
Karvy Stock Broking, said.

Last week, the market fell 9.4 percent -- its biggest fall
in eight months -- after the government's budget disappointed
investors who were expecting bold economic and financial
reforms.
Analysts say investors need patience as key policies are
increasingly made outside the budget process.

The finance minister said on Tuesday the economy was
showing signs of recovery and the government has to borrow more
in 2009/10 to meet its spending needs. [ID:nBMA003335]

"The market was technically oversold, and today it is
bouncing back," Arun Kejriwal, strategist at research firm
KRIS, said.

"It is being driven by the fact U.S. markets were up
yesterday, and Asia markets are up today after five days of
gloom all over the world."

In the near term, the performance of overseas markets would
determine the direction of Indian shares, traders said.

Asian shares rose on Tuesday, with Japan's Nikkei .N225
gaining 2.3 percent and MSCI's measure of other Asian markets
.MSCIAPJ rose 3.4 percent.

At 1020 GMT, the FTSEurofirst 300 .FTEU3 index of top
European shares was up 1 percent.

In India, ICICI Bank rose 7.6 percent to 679.80 rupees, and
engineering and construction conglomerate Larsen & Toubro
(LART.BO) gained 3.2 percent to 1,372.70 rupees.

Reliance Industries, India's largest-listed firm with the
most weight in the main index, climbed 3.6 percent to 1,811.20
rupees, and Housing Development Finance Corp advanced 7.3
percent to 2,368 rupees.

In the broader market, gainers led losers by more than 3 to
1 on relatively light volume of 315.8 million shares.

The 50-share NSE index rose 3.46 percent to
4,111.40.

"This may turn out be just a temporary bounce-back, as
there are going to be no domestic triggers for the market to
continue going up this week," Karvy's Baliga cautioned.

MAIN TOP 3 BY VOLUME

* Suzlon Energy (SUZL.BO) on 16.8 million shares

* Unitech (UNTE.BO) on 15.8 million shares

* Reliance Natural Resources (RENR.BO) on 10.3 million
shares

STOCKS THAT MOVED

* Jewellery maker Gitanjali Gems Ltd (GTGM.BO) gained 4.5
percent to 96.80 rupees after it bought a majority stake in
U.S.-based diamond jewellery maker, Diamlink Inc.

* Era Infra Engineering Ltd (ERCI.BO) rose 8 percent to
118.35 rupees after its board approved raising 10 billion
rupees and raised the foreign institutional investor limit in
the company to 65 percent of the paid-up equity share capital.

FACTORS TO WATCH
* For technical analysis double click on www.reutersindia.net
* Indian rupee gains on stx rise; higher Asian units
[INR/]
* India bond yields up on U.S. cues, calendar awaited
[IN/]
* Dlr softer before earnings; euro pares gains
[FRX/]
* Oil above $60 as global equities rally [O/R]
* Equities climb ahead of Goldman earnings [MKTS/GLOB]
* US stock futures higher ahead of Goldman results

[.N] * For closing rates of Indian ADRs

INADR (Editing by John Mair)