* Up 0.7 pct; extend gains for 3rd session in a row
* Metals shine on firm price trend, hopes of robust output
* Bharti gains as Bangladesh approves Warid stake buy (Updates to close)
MUMBAI, Jan 5 (Reuters) - Indian shares climbed 0.7 percent on Tuesday to their highest close in 22 months, propelled by metals in anticipation of robust December output data and stronger prices as a recovering economy boosts demand.
Sentiment was also helped after a top economic adviser said there was no need to raise interest rates for now, and the central bank could drain excess cash to moderate inflation expectations. [ID:nSGE60404T]
Leading aluminium maker Hindalco Industriesadded 7.4 percent to 175.20 rupees. Rival state-run National Aluminium Co Ltd jumped 14.8 percent to 505.20 rupees.
"The outlook for metals stocks is good. Base metal prices are showing a firm trend. December quarter results are likely to be better due to the base effect," said Pawan Burde, vice-president of research at PINC Research.
"Also, JSW Steel production numbers have raised hopes that others may follow suit," he said.
JSW Steel Ltd, India's No. 3 producer of the alloy, said its crude steel output jumped 88 percent to 1.47 million tonnes in the three months to December. [ID:nBMB009344]
Some small steel makers also raised prices, boosting sentiment. [ID:nSGE6040BI]
Non-ferrous metals producer Sterlite Industriesrose 4.6 percent while Tata Steel , the world's eighth-largest steel maker by output, climbed 2.4 percent.
The 30-share BSE indexrose for the third straight session and closed up 0.73 percent, or 127.51 points, at 17,686.34, its best close since Feb. 28, 2008.
Twenty-three of its components advanced.
"The mood is positive on the back of positive data like auto sales numbers for December and PMI data. Also, firm base metal prices are helping," said K. K. Mital, head of portfolio management services at Globe Capital.
"Right now, there is nothing so negative that can hurt the market," he added.
Foreign funds pumped $17.5 billion into Indian equities in 2009, powering the main index up 81 percent, its best yearly gain since 1991.
ICICI Bankrose nearly 1 percent and mortgage lender Housing Development Finance Corp gained 0.3 percent after C. Rangarajan, the prime minister's economic adviser, said an adjustment in policy interest rates was not warranted for now.
Engineering and construction firm Jaiprakash Associates, which also has interests in power, rose 5.8 percent to 162.70 rupees as its December cement shipments leapt 60 percent to 1.06 million tonnes. [ID:nBMA006685]
"Jaiprakash is benefitting from good delivery at its cement business. Capacity expansion along with signs of firm demand trend is helping," said Daljeet Kohli, head of research for private client group at Emkay Global.
Bharti Airtelgained 1.6 percent to 330.10 rupees after Bangladesh's telecoms authority approved its initial investment of $300 million in Bangladesh mobile company Warid Telecom. [ID:nSGE60407P]
Energy major Reliance Industriesextended its decline, losing 0.5 percent to 1,069.55 rupees.
The stock had shed 1.3 percent on Monday as the firm sold some shares raising $577 million to aid its buy of bankrupt petrochemicals firm LyondellBasell (LBI). [ID:nSGE60304C]
"While we do not see much in terms of cost synergies for RIL from the deal, we believe it would likely give RIL access to LBI's leading distribution network in Europe/U.S. and presence in the Middle East through LBI's upcoming low-cost capacity," Goldman Sachs said in a note.
In the broader market, gainers led losers in a ratio of 1.6:1 on heavy volume of 704 million shares.
The 50-share NSE indexrose 0.9 percent to 5,277.90.
STOCKS THAT MOVED
* Top vehicle maker Tata Motorsshed 2 percent to 810.95 rupees as investors took profits after it had quintupled in 2009.
* Dr Reddy's Laboratoriesclimbed 2.9 percent to 1,177.25 rupees after the drug maker said phase III clinical trial for its anti-diabetic molecule balaglitazone, being conducted by Danish firm Rheoscience, had achieved the set parameters. [ID:nSGE6030GL]
* Realty firm Godrej Propertiesgained 9.1 percent on debut to 534.55 rupees. [ID:nSGE60403A]
MAIN TOP 3 BY VOLUME
* JSW Energyon 32.3 million shares
* Mahindra Satyamon 21.9 million shares
* NHPCon 16.7 million shares
FACTORS TO WATCH * For technical analysis double click on www.reutersindia.net * Indian rupee report [INR/] * Indian bond report [IN/] * Dollar slips broadly, some risk assets in demand [FRX/] * Oil nears $82 on 9th day of gains; cold snap boosts [O/R] * Hopes for economy drive risk appetite [MKTS/GLOB] * Wall Street futures point to weaker start [.N] * For closing rates of Indian ADRs(Editing by Ranjit Gangadharan)
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