(Repeats to widen distribution)
* BSE index gains 0.54 pct; NSE index up 0.48 pct
* Both indexes mark record closing highs; NSE hits life high
* Reliance Industries, HDFC Bank gain
By Indulal PM
MUMBAI, July 4 (Reuters) - India's NSE index hit a record high on Friday as bluechips such as Reliance Industries rose on optimism that Prime Minister Narendra Modi will deliver a fiscally prudent budget next week.
Investors are betting that Modi and Finance Minister Arun Jaitley will unveil next week a credible budget that seeks to raise revenue, including from sales of state-run firms, while keeping spending under control.
Foreign institutional investors, who have been the backbone of the 23 percent gain in the broader NSE index so far this year, bought Indian shares worth 9.51 billion rupees ($159.27 million) on Thursday, exchange and regulatory data showed.
"Most investors, including FIIs, are putting new money in the market on hopes the budget will lead the way to a revival in the economy. Build-up of positions has already started," said Deven Choksey, managing director at KR Choksey Securities.
"The budget may focus on revival in growth and fiscal consolidation. We are bullish and expect the Nifty to trade between 7,500 and 8,000 in the near term,"
The benchmark BSE index closed 0.54 percent higher at record 25,962.06. It gained 3.4 percent this week after falling in the previous three weeks.
The broader NSE index ended 0.48 percent higher at record 7,751.60, gaining 3.2 percent this week.
Bluechips were among the leading gainers. Reliance Industries Ltd ended 2.5 percent higher, marking its biggest single-day gain since June 6.
Other gainers included HDFC Bank, which was up 2.4 percent, and NTPC Ltd which gained 0.8 percent.
Investors also hedged their risk by buying defensives such as drug makers. Dr Reddy's Laboratories Ltd rose 1.5 percent and Sun Pharmaceutical Industries Ltd ended 0.4 percent higher.
Among other bluechips, Bharti Airtel Ltd gained 0.7 percent after the Reserve Bank of India increased limit for overseas investors to buy shares in the company.
However, recent outperformers such as metal stocks were under selling pressure. Hindalco Industries Ltd ended 0.3 percent lower, adding to its 2.52 percent fall on Thursday. The stock still gained 7.7 percent this week. Tata Steel Ltd ended 0.5 percent lower.
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FACTORS TO WATCH * Dollar struggles against doubts over Fed shift * Brent holds above $111, US oil in longest losing streak since 2009 * World stocks hold at all-time highs after bumper week * Foreign institutional investor flows * For closing rates of Indian ADRs
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(Reporting by Indulal PM; Editing by Subhranshu Sahu)