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* BSE index gains 0.21 pct; up 5.7 pct for FY14
* NSE index ends up 0.12 pct; gains 6.35 pct for FY14
* Indexes mark best monthly performance since October 2013
By Indulal PM
MUMBAI, March 31 (Reuters) - Indian shares edged up on Monday, hitting a sixth consecutive record high and posting their best monthly gain since October, as strong foreign buying sparked a rally in blue-chips, especially those dependant on the domestic economy.
The NSE index's 6.81 percent gain in March was its best performance since a 9.8 percent gain in October. For the quarter, the index rose 6.35 percent, a second consecutive rise since its 9.9 percent gain in the October-December period.
The record-setting rally has been sparked by heavy foreign buying - reaching a provisional $3.2 billion so far this month - as analysts cite expectations the opposition Bharatiya Janata Party would win elections set to conclude by mid-May, given its perception of having a more market-friendly stance.
Bets that India's economy will improve on the back of easing inflation have also played a key role. Interest-rate sensitive stocks such as banks and property developer DLF Ltd have been the top gainers this month.
The Reserve Bank of India is widely expected to hold interest rates on hold on Tuesday, pausing after tightening monetary policy by 75 bps since September.
"We will have to see whether the overseas fund flow will sustain. At this point in time, what we can say is markets should trade within a range and the undercurrent is positive," said Suresh Parmar, head, institutional equities at KJMC Capital Markets.
"The RBI policy is a non-event as it has already been discounted. Participants are waiting for the election outcome, which will have a major impact than tomorrow's policy announcement," he added.
The benchmark BSE index ended 0.21 percent higher at 22,386.27 points, after earlier hitting a record high at 22,467.21.
The broader NSE index gained 0.12 percent to 6,704.20 points, after earlier hitting a record high of 6,730.05.
The NSE rose 6.35 percent during the fiscal year ending on Monday, marking a third consecutive yearly gain.
Trading volumes were thin since bond and currency markets were closed for a local holiday.
Some banks extended gains even after posting a strong performance this month. State Bank of India rose 0.83 percent on Monday, bringing its gain in March to 24 percent.
Among lenders, Punjab National Bank was the best performer of the NSE this month with a 35 percent rally. On Monday it lost 0.85 percent.
Shares more closely tied to the domestic economy also outperformed this month, while exporters such as Tata Consultancy Services Ltd have fallen as a stronger rupee is seen denting earnings.
Cement maker ACC Ltd gained 2.73 percent on Monday and 26.67 percent for the month. Jaiprakash Associates surged 2.48 percent on Monday and 28.2 percent for the month.
Meanwhile, metals stocks rose on Monday, extending a rally this month on hopes a new government would ease new infrastructure projects and on easing concerns about China's economy. Hindalco Industries gained 8.29 percent, bringing its gain for the month to 34.6 percent.
However, capital goods companies saw some profit-taking. Larsen and Toubro lost 1.26 percent after gaining 14.6 percent till Friday and Bharat Heavy Electricals Ltd ended down 2.02 percent. BHEL gained 16.9 percent so far this month till Friday.
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FACTORS TO WATCH * Euro steady ahead of inflation data, ECB * Oil near two-week high on Russian supply worries * Mixed reaction to weak euro zone inflation data * Foreign institutional investor flows * For closing rates of Indian ADRs
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