BSE Sensex up 0.3% in choppy trade

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MUMBAI (Reuters) - The BSE Sensex traded 0.3 percent higher in choppy trade on Tuesday as investors turned cautious after a recent rally, taking cues from rating agency Moody's warning that it may cut its triple-A ratings on France, the United Kingdom and Austria.

Software exporters, which focus on the U.S. and European markets for most of their business, and drugmaker Cipla were trading weaker, but investors turned bullish on State Bank of India and Tata Motors on strong earnings growth prospects.

By 10:10 a.m. (0440 GMT), the main 30-share BSE stock index was up 0.3 percent at 17,823.36 points, but was trading in a very narrow range after opening marginally lower. Nineteen of its components were trading higher.

"The market has run-up so much, it may have gone ahead of its fundamentals," said Gajendra Nagpal, chief executive officer at Unicon Financial Intermediaries.

"I won't be surprised if it corrects 3-4 percent but any downside is likely to be capped," he said.

The index has posted weekly gains for six consecutive weeks, helping it rise more than 15 percent so far in 2012, fuelled mostly by foreign fund inflows of about $4 billion this year. It had declined nearly 25 percent in 2011.

Largest lender State Bank of India led the gains, rising 4 percent after reporting a better-than-expected 15 percent rise in quarterly profit on Monday, with investors ignoring a rise in non-performing assets.

Private sector rival ICICI Bank rose 1.5 percent, but HDFC Bank was down 0.8 percent.

Tata Motors was up 1.7 percent ahead of its results as investors bet on higher profits, driven by strong sales at its luxury Jaguar-Land Rover unit.

Analysts expect the company to report a net profit of 26.13 billion rupees for the December quarter, according to Thomson Reuters I/B/E/S, up from 24.2 billion rupees a year ago.

Utility vehicle maker Mahindra & Mahindra and Maruti Suzuki were up 1.4 percent and 1 percent, respectively.

Software exporters were trading lower on worries the global economic woes might impact technology spending by corporates. Shares in Tata Consultancy Services were down 0.3 percent, Infosys fell 0.5 percent, while Wipro was trading down 0.5 percent.

Rating agency Moody's warned on Monday it may cut the triple-A ratings of France, the United Kingdom and Austria, and it downgraded six other European nations including Italy, Spain and Portugal, citing growing risks from Europe's debt crisis.

Cipla Ltd was down more than 4 percent after the drugmaker reported a lower-than-expected 16 percent rise in its December-quarter net profit.

Asian shares were trading weaker, with the MSCI's broadest index of Asia Pacific shares outside Japan shedding 0.7 percent, while Japan's Nikkei eased 0.2 percent.

The 50-share NSE index was up 0.3 percent up at 5,407.30 points.

In the broader market, 842 gainers led 425 declines, with 173 million shares changing hands.

STOCKS TO WATCH

* Sasken Communication Technologies rose 13 percent to 121.70 rupeees after the company said its board would consider a share buyback.

* Reliance Power rose 1.9 percent to 109.40 rupees after it posted a 42 percent jump in December-quarter net profit on higher power generation and doubling of other income.

* Punj Lloyd rose 2.4 percent to 61.15 rupees after the civil engineering firm posted 703.4 million rupees profit in the December quarter, compared with a loss of 621.3 million rupees in the previous year.

TOP THREE BY VOLUME

* IFCI on 13.4 million shares.

* Lanco Infratech on 9.7 million shares.

* Suzlon Energy on 8.8 million shares.

(Reporting by Prashant Mehra; Editing by Aradhana Aravindan)