Indian shares extend gains; Tech Mahindra leads gains on AT&T deal

* NSE, BSE indexes up around 0.5% each

* Tech Mahindra touches 10-week high after AT&T deal

* Indiabulls Housing plunges on reports of litigation

Sept 6 (Reuters) - Indian shares rose for a third straight session on Friday, in line with gains in broader Asia, as U.S.-China trade tensions eased, with IT firm Tech Mahindra Ltd leading gains after scoring a deal with U.S. telecoms firm AT&T Inc.

The broader NSE index was up 0.49% at 10,900.8 as of 0432 GMT, while the benchmark BSE index was 0.53% higher at 36,834.88.

Both indexes were, however, set to finish the week over 1% lower, after seeing heavy sell off earlier in the week on worries of slowing economic growth.

“Foreign investors are still net sellers in the market due to the slowdown,” said Anita Gandhi, whole-time director at Arihant Capital Markets, adding that markets are still awaiting measures from the government to stimulate the economy.

“There is intent on the government’s part, but we are yet to see an announcement to boost the economy, after which we may see a let up in the stock market.”

Meanwhile, foreign investors pulled out 5.61 billion rupees ($78.21 million) from capital markets on Thursday, according to NSE data.

Asian stocks edged higher on Friday after the United States and China agreed on Thursday to hold high-level talks early in October, raising hopes for substantial progress in de-escalating their trade conflict.

In the local markets, Tech Mahindra climbed as much as 5.3% to over 10-week high, after it said it would expand its collaboration with AT&T to accelerate the U.S. telecom company’s IT network application, shared systems modernisation and movement to the cloud.

The stock was the top percentage gainer on both indexes.

Private-sector lender Axis Bank Ltd climbed 2.3% to a one-week high.

However, mortgage lender Indiabulls Housing Finance Ltd capped gains on the index as it fell nearly 10% on reports that a public interest litigation had been filed against the company and its promoters.

The stock, which had already lost around 48% this year up to last close, touched an over four-and-a-half year low on Friday.

Drugmaker Sun Pharmaceutical Industries Ltd fell as much as 4% after it confirmed that India’s market regulator was conducting a forensic audit of the company’s financial statements for the years ended March 2016 to March 2018. ($1 = 71.7300 Indian rupees) (Reporting by Chris Thomas in Bengaluru; Editing by Rashmi Aich)