Britain's FTSE recovers from steep weekly fall, lifted by ARM

* FTSE 100 up 0.6 pct

* ARM rises after U.S. led tech fall last week

* Kingfisher (LSE: KGF.L - news) gains after Mr Bricolage deal collapse

* CRH (NYSE: CRH - news) drops on Holcim (LSE: 0QKY.L - news) -Lafarge (Paris: FR0000120537 - news) merger uncertainty

By Alistair Smout

LONDON, March 30 (Reuters) - Britain's top share index rose on Monday, recovering ground in a broad-based rally after a steep weekly drop, supported by a rise in chip-designer ARM after gains for the tech sector on Wall Street.

ARM rose 2.4 percent, the top FTSE 100 riser, recovering after dropping 10 percent in two days last week.

It gained following a rebound in semiconductor stocks in late U.S. trade on Friday after a report that Intel Corp is in talks to buy rival Altera Corp (NasdaqGS: ALTR - news) .

"The sector is still fairly solid. It obviously had a pull-back over the last week or so ... but the trend remains fairly bullish across the board," said Manoj Ladwa, head of trading at TJM Partners.

The broader FTSE 100 also recovered from a weekly fall, up 55.98 points, or 0.6 percent, at 6,911.00 by 0813 GMT, after dropping 2.4 percent last week. Only 13 stocks were in negative territory.

It rose back towards a record high last set on Tuesday at 7,065.08, although the index remained 2.2 percent away from that level.

Despite its return to all-time highs, the British blue-chip index has underperformed euro zone shares since the euro zone crisis peaked in the summer of 2012.

A general election in May, the outcome of which remains deeply uncertain, has many investors betting that this underperformance could continue.

"On the positive side UK relative valuations have improved substantially following the 30 percent underperformance versus euro zone. However, the May elections could be quite messy; we prefer to stay (underweight) into that event risk," equity strategists at JP Morgan said in a note.

Kingfisher rose 2.3 percent after Europe's largest home improvement retailer said its proposed 275 million euro ($298 million) purchase of smaller French rival Mr Bricolage had collapsed.

In other merger and acquisition news, CRH fell 1.3 percent on concerns that investors in Holcim were unhappy with the revised deal to merge with Lafarge.

Irish cement maker CRH has agreed to buy assets from Holcim-Lafarge that could transform its business. However, the deal is contingent on the merger being completed.

Marks & Spencer (Other OTC: MAKSF - news) rose 2 percent after the high-street retailer received upgrades from both RBC (Other OTC: RBCI - news) and Societe Generale (Paris: FR0000130809 - news) .

(Reporting by Alistair Smout; Editing by Crispian Balmer)