* BSE index gains 0.86 pct, NSE index up 0.79 pct
* State Bank of India slumps on weak earnings
* Investors to take cues from Union Budget on Monday
By Indulal PM
MUMBAI, Feb 14 (Reuters) - Indian shares ended higher on Friday, led by telecom services providers and software companies ahead of the interim budget where Finance Minister Palaniappan Chidambaram has a tough task of wooing voters while keeping fiscal discipline.
State Bank of India, however, slumped after the country's biggest lender reported a fourth straight consecutive drop in quarterly net income, dragging other lenders down.
Chidambaram will be walking a tightrope when he presents an interim budget for the coming fiscal year on Monday, doling out more funds to woo voters and tax cuts to support industry while projecting a lower fiscal deficit before elections.
Analysts are not betting on any major policy announcement, but will await the fine print on how Chidambaram meets his fiscal deficit target of 4.8 percent for the current fiscal year.
"The budget is the last statement for the government to do whatever it can on reforms. However, I think the finance minister will do some tinkering at best," said UR Bhat, MD, Dalton Capital Advisors, which advises foreign institutional investors in India.
Data showing wholesale prices-based inflation eased to an eight-month low in January also lifted investors' sentiment, traders said.
The benchmark BSE index closed up 0.86 percent at 20,366.82, while the broader NSE index ended higher 0.79 percent at 6,048.35.
The BSE index fell 0.05 percent on a weekly basis, while the NSE lost 0.2 percent.
Overseas investors bought Indian shares worth 3.99 billion rupees ($64 million) on Thursday, exchange data showed. Foreign investors were net buyers for a second straight session after a nine-day selling streak in the secondary share market, data showed.
Shares in software services companies gained on defensive-buying by institutional investors, traders said. Infosys gained 1.63 percent, while Tata Consultancy Services ended up 1.6 percent.
Shares in telecom companies rose after they won airwaves in the premium 900 megahertz band spectrum.
Bharti Airtel ended up 0.86 percent and Idea Cellular closed higher 0.68 percent.
State Bank of India fell 1.7 percent after its earnings disappointed investors.
Shares of Bajaj Auto ended 3.32 percent lower on news that Egypt's government is proposing a ban on import of motorbikes and three-wheelers, which is an important export market for the Indian company.
Shares in Future Retail ended up 1.29 percent after gaining as much as 20 percent earlier in the day, after the company's October-December quarterly earnings beat estimates.
For additional stocks on the move double click
FACTORS TO WATCH * Dollar struggles after soft US data, euro looks to GDP * Brent steady below $109; Libya, Angola supply disruptions support * Stocks rise, dollar struggles after downbeat US data * Foreign institutional investor flows * For closing rates of Indian ADRs
ASIA-PACIFIC STOCK MARKETS: Pan-Asia........ Japan....... S.Korea... S.E. Asia....... Hong Kong... Taiwan.... Australia/NZ.... India....... China.....
OTHER MARKETS: Wall Street .... Gold ....... Currency.. Eurostocks..... Oil ........ JP bonds... ADR Report ..... LME metals. US bonds.. Stocks News US.. Stocks News Europe
DIARIES & DATA: Indian Data Watch Asia earnings diary U.S. earnings diary European diary Indian diary Wall Street Week Ahead Eurostocks Week Ahead
For top Asian company news, double click on:
U.S. company news European company news
Forex news Global Economy news
Technology news Telecoms news
Media news Banking news
Politics/General Asia Macro data <ECONASIA (Additional Reporting Abhishek Vishnoi; Editing by Subhranshu Sahu)