Indian shares snap 6-day losing streak; RBI pauses ahead of Fed

* BSE index gains 1.2 pct; NSE ends 1.27 pct higher

* All BSE sectoral indexes end positive; rate-sensitive

stocks surge

* India's inflation to moderate in Dec-finance ministry

official

* Trent (BSE: TRENT.BO - news) surges after Tesco (Berlin: TCO.BE - news) says to buy 50 pct in unit

By Abhishek Vishnoi

MUMBAI, Dec 18 (Reuters) - Indian shares rose more than 1

percent on Wednesday to snap their six-day losing streak, led by

gains in rate-sensitive stocks such as DLF after the central

bank surprised investors by keeping rates unchanged despite

talking tough on inflation.

The central bank warned it would remain vigilant on

inflation and that it would be ready to act even in between

policy reviews should headline or core inflation not ease as

expected.

Analysts said that opened the prospect of rate hikes after

January given expectations that inflation will moderate this

month. Economic Affairs Secretary Arvind Mayaram told Reuters a

softening in seasonal vegetable prices is expected to cool food

inflation.

The focus now shifts to the outcome of the U.S. Federal

Reserve's two-day meeting ending later in the day. Any decision

to start withdrawing monetary stimulus could spark fears of

foreign selling in emerging markets such as India.

Overseas investors have made net purchases of around $18

billion so far this year, making India the number one recipient

of foreign stock investment in emerging Asia, data from Deutsche

Bank shows.

"I think before the end of December we may hit new highs on

RBI policy, year-end buying, and unless the Fed tapers

aggressively it won't impact us because it has been discounted

to a great extent," said Paras Adenwala, managing director and

principal portfolio manager, Capital Portfolio Advisors.

The benchmark BSE index rose 1.2 percent, or 247.72

points, to end at 20,859.86, marking its highest close in nearly

a week.

The broader NSE index gained 1.27 percent, or 78.10

points, to end at 6,217.15, closing above the psychologically

important 6,200 level.

Both indexes marked their biggest single-day gain since Dec.

9 when they surged to record high after the main opposition

party won the state polls.

All sectoral indexes gained and rate-sensitive stocks led

the upside. Real (Xetra: RQX.DE - news) estate developer DLF Ltd rose 5.4

percent, while Hero MotoCorp Ltd gained 3.4 percent.

Shares in state-owned banks outperformed their private

sector counterparts on expectations of higher bond portfolio

gains after the central bank's rate decision.

Punjab National Bank Ltd rose 4.2 percent and

State Bank of India (BSE: SBI.BO - news) advanced 2.6 percent.

Among private sector lenders, Axis Bank Ltd rose

2.1 percent, while IndusInd Bank Ltd ended higher 3.6

percent.

Trent Ltd surged 10.8 percent after Tesco Plc

said on Tuesday it had applied to buy a 50 percent

stake in the company's unit, Trent Hypermarket Ltd.

Shares in other organised retailers also rose as Tesco's

plan to invest in Trent raised hopes that there will be other

buyouts and deals in India's $500 billion retail sector, dealers

said.

Future Retail Ltd rose 5.1 percent, while

Shopper's Stop Ltd gained 5 percent.

Biocon Ltd surged 11.5 percent after it said it

will collaborate with Quark Pharmaceuticals to co-develop a drug

for ophthalmic conditions.

However, among stocks that fell, Alok Industries Ltd (BSE: ALOKIND.BO - news)

dropped 2.6 percent on going ex-dividend.

For additional stocks on the move double click

FACTORS TO WATCH

* Yen slips as investors await Fed meeting outcome

* Brent holds above $108 ahead of Fed decision on stimulus

* German data lifts European shares as Fed decision looms

* Foreign institutional investor flows

* For closing rates of Indian ADRs

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(Editing by Subhranshu Sahu)