* NSE gains as much as 2.1 pct to record 6,537.8 points
* BSE hits record high for second daily session
* Domestic-focused firms outperform, IT shares fall
(Adds foreign investor buying data, paragraph 3)
By Abhishek Vishnoi and Rafael Nam
MUMBAI, Mar 7 (Reuters) - India's NSE index rose as much as
2.1 percent to a record high, and the benchmark BSE index hit
its record for a second consecutive session, as foreign
investors bet big in a country that just months ago was gripped
by market turmoil.
The broader NSE's all-time high of 6,537.80 points
surpassed its previous high of 6,415.25 hit on Dec. 9, although
the benchmark BSE got there first, hitting a record
high on Thursday and again on Friday.
As in December, foreign investors are driving the rally,
posting on Friday their biggest daily purchases since Dec. 9, or
a net 25.77 billion rupees ($420.73 million). That marked a 16th
consecutive buying session for a net total of about $1.4
The strong buying is confounding expectations that foreign
investors would turn cautious ahead of general elections due to
start on April 7 and conclude by mid-May.
Expectations that the opposition Bharatiya Janata Party, led
by its prime ministerial candidate, Narendra Modi, would win
those elections are helping spark some of the gains, amid
widespread perceptions it has a more business-friendly stance
than the ruling Congress-led coalition.
But analysts say the rally could also signal a longer-term
bet on a rebound in India's economy, given signs that foreign
investors are switching from exporters, which had attracted the
bulk of overseas buying last year, to domestic-focused sectors.
"One-way buying by overseas investors is supporting the
gains. We expect sectors, which are connected to the core
economy such as infrastructure, capital goods and metals are
likely to see more buying interest," said Suresh Parmar, head of
institutional equities at KJMC Capital Markets.
The NSE ended up 2 percent, or 125.50 points, posting its
biggest daily percentage gain since Nov. 25. The 50-member index
rose nearly 4 percent for the week.
The BSE index rose 1.9 percent, or 405.92 points,
after earlier setting a record high at 21,960.89 points. It rose
3.8 percent for the week.
For the year, foreign investors have bought a net $850
million in shares, after buying $20 billion worth last year.
Overseas funds have also turned into strong buyers of debt,
with net purchases of $4.9 billion so far this year, helping
partly reverse their net sales of $8 billion in debt in 2013.
The strong buying is a stark turnaround from last year when
India was struggling to contain a record-high current account
deficit, sending the rupee to a record low of 68.85 to the
dollar in late August.
However, strong curbs on gold imports imposed by the
government, including a 10 percent duty, has helped narrow the
current account deficit, leading to a more stable currency.
The rupee reached up to 60.9450 to the dollar, its strongest
level since Dec. 9.
BETTING ON INDIA
Domestic-focused shares were among Friday's top gainers,
amid signs of increased foreign buying on rising expectations
for the economy to rebound from its slowest growth in a decade
this fiscal year.
Overseas holdings in shares of capital goods companies since
mid-September rose 37.4 percent to $12.78 billion by Feb. 28,
regulatory data shows, while overseas holdings in banks rose
Biggest private sector lender ICICI Bank surged 6
percent, while State Bank of India rose 4.6 percent.
Other rate-sensitive stocks rallied on expectations of a
fall in inflation after the central bank raised interest rates
aggressively since September. India's largest real estate
developer, DLF Ltd, jumped 9.7 percent.
Larsen & Toubro Ltd, India's biggest engineering
and construction firm, jumped 4.9 percent.
But exporters fell, with Infosys Ltd losing 2.4
percent and Sun Pharmaceutical Industries Ltd dropping
1.4 percent, reversing last year's trend of foreign investors
betting big on drugmakers and software services exporters.
($1=61.2500 Indian rupees)
(Additional reporting by Indu Lal; Editing by Eric Meijer and