By Devidutta Tripathy MUMBAI (Reuters) – The BSE Sensex rose 2.84 percent on Tuesday, a fifth straight gain that took it to its highest close in two weeks, on hopes that cuts in bank lending rates would help credit flow more freely and ease a cash squeeze. The top two banks, State Bank of India and ICICI Bank, rose 6.5 percent each, with ICICI posting its strongest close in a month. Hopes that the market's 38 percent surge from a three-year low hit last week would lead to some foreign inflows helped the rupee strengthen to a three-week high past 48.00 per dollar, which weighed on software exporters that get half of their revenue from the United States. Infosys Technologies fell 3.3 percent, and Tata Consultancy and Satyam Computer Services lost both lost 7.4 percent. Finance Minister Palaniappan Chidambaram said the central bank would keep a close watch on cash conditions and banks will provide credit to key sectors, and the chairman of State Bank said his bank would cut lending rates by 25 or 50 basis points. "Easy money is going to be made available again," said Gajendra Nagpal, CEO at Unicon Financial in New Delhi. "If interest rates head lower, that would have a positive impact on corporate profitability." "Feels like there is some serious kind of bargain hunting going on. May be money from domestic mutual funds and insurance companies, which was waiting on the sidelines, is coming to the market." The 30-share benchmark index rose 293.44 points to 10,631.12, its highest close since Oct 21, with 24 stocks rising, having been down more than 2 percent in morning trade. While the index has rallied sharply from a three-year low of 7,697.39 hit on Oct. 27, it is still down 47.6 percent in 2008. In the broader market gainers led losers 1,812 to 785 on relatively high volume of 387 million shares. "Seems like the RBI move had its desired impact, but difficult to say how long it will continue. Thirty eight percent in just over a week, nobody really anticipated," Nagpal said. The Reserve Bank of India cut its main short-term lending rate by 50 basis points and banks' cash and bond reserve requirements by 100 basis points last Saturday to counter a squeeze on credit and shore up the economy against a global recession. In October, it had lopped 100 points off the repo rate and slashed banks' cash reserve requirements by 250 basis points. Top realty play DLF Ltd rose 14.7 percent, the biggest percentage rise among the top 30 stocks, on hopes lower loan rates would boost demand for its properties. The stock is still down 73 percent down in 2008. State-run explorer Oil and Natural Gas Corp rose 7.1 percent to 761.30 rupees on strong interest from domestic institutions, traders said. The stock had last week hit 540 rupees, its lowest level in more than three years. The 50-share NSE index gained 3.23 percent to 3,142.10. STOCKS THAT MOVED * Unitech Ltd, the country's No. 2 listed real estate firm, jumped 14.5 percent to 56.10 rupees on hopes that banks would lower home loan rates. * Suzlon Energy Ltd climbed 20.6 percent to 55.40 rupees. Suzlon and Portugal's Martifer said they were in talks over the timing of Suzlon's purchase of a 22.48 percent in Germany's REpower. MAIN TOP THREE BY VOLUME * Suzlon Energy on 39.2 million shares. * Unitech Ltd on 17.1 million shares * Reliance Natural Resources on 17 million shares.

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