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 The BSE Sensex rose more than 1% on Friday, on course to log its seventh consecutive weekly rise, buoyed by strong foreign fund inflows and firm overseas markets after indications euro zone officials would soon approve a bailout for Greece.

The country's top lenders State Bank of India and ICICI Bank were among the biggest gainers, fuelled by improved credit demand outlook amid hopes of interest rate cuts by the central bank.

The main 30-share BSE index was up 1.1% at 18,345.75 with all but six of its components rising. It earlier rose as much as 1.5% to its highest level in more than five months.

"The liquidity flow is strong in the market that few people are paying attention to fundamentals that doesn't seem to have changed much," said Ambareesh Baliga, chief operating officer at Way2Wealth.

The BSE index is up nearly 19% this year, bolstered by surging overseas portfolio investments. Foreign investors have bought shares worth about USD 4.4 billion so far this year, after pulling our more than USD 500 million in 2011.

Citigroup said in a research report that the rally was mainly driven by overseas inflows with "relatively little evidence" of retail participation, though the domestic economy or the corporate sector outlook has not changed much.

The Indian economy has lost momentum as lingering euro zone debt woes coupled with high domestic interest rates and a policy paralysis at home have hit capital investments by companies reeling under slowing growth.

The government earlier this month cut the economic growth forecast for the current fiscal year to 6.9%, the slowest pace in three years. The GDP data for the October-December quarter is due on February 29.

"We argue that while the macro and the market have moved favorably - the economy/corporate sector have to play catch up, and deliver in earnings, investment, expansion and risk appetite," Citigroup analysts wrote in the research note.

"We like this rally ... but such sharp, liquidity backed and 'going with the flow' kind of investor and inflow momentum can be a scary thing," they said, adding the brokerage retained its year end BSE index target of 18,400 despite the current rally.

Shares of financials are among the biggest gainers this year, as the Reserve Bank of India (RBI) is widely expected to start cutting interest rates in the quarter beginning April 1 to stimulate the economy.

The central bank ran a 20-month interest rate tightening cycle until October to slow down inflation, hitting credit demand and asset quality of banks.

State Bank of India was up 4.6% at Rs 2,459 and ICICI Bank gained 2.3 percent to Rs 990.40 on Friday on fresh buying by institutional investors, dealers said. The sector index was up 2.2%.

Industrials such as Bharat Heavy Electricals Ltd was trading up 9.7% at Rs 312.20 and Larsen & Toubro surged 2.5% to Rs 1,484, as investors bet on rise in orders on higher investments by sectors like power.

NTPC Ltd plans to award USD 3.25 billion of equipment order by March-end after a ruling by India's top court settled a case with a bidder in favour of the country's top power producer, its Chairman said on Thursday.

The broader 50-share NSE index was up 1.28% at 5,592.40 points. In the broader market, there were nearly 5 gainers for every loser on relatively strong volume of more than 376 million shares.

STOCKS ON THE MOVE

* Man Industries Ltd was up 3.7% at Rs 113.50 after the company said it got orders worth 5 billion rupees, taking the total order book to 16 billion rupees.

* Adhunik Metaliks