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Indian shares gain; time for insurance sector to rally

* BSE ends up 0.24 pct, NSE rises 0.22 pct

* Both indexes hit highest close since July 2011

* Infrastructure, insurance-related stocks gain

* Infosys falls on July-Sept earnings concern

(Final update for the day) By Manoj Dharra

MUMBAI, Oct 3 (Reuters) - Indian shares gained on Wednesday for a third consecutive session after infrastructure companies extended gains on hopes for additional support measures for the sector, while insurance-related stocks also gained on optimism for government action.

A Reuters poll on Wednesday showed fund managers are switching to construction-related shares following government initiatives to bolster India's sagging infrastructure, while selling more expensive consumer good stocks.

Foreign investor flows have also helped domestic markets, with September recording over $3.5 billion in net purchases, on the back of recent global monetary stimulus measures.

"There are expectations of more reforms such as cabinet approval on insurance," said G. Chokkalingam, Chief Investment Officer at Centrum Wealth Management, referring to the long-discussed increase in foreign direct investment into the sector.

"Markets would move higher in three to six months due to reforms, their implementation and rupee appreciation"

India's benchmark BSE index

rose 0.24 percent, or 45.78 points, to end at 18,869.69, marking its highest close since July 25, 2011.

The 50-share NSE index gained 0.22 percent, or 12.45 points, to 5,731.25 points, its highest close since July 7 2011.

Infrastructure companies gained ahead of a panel meeting scheduled for later in the day that has been mandated to revise existing policies and suggest necessary changes in the investment framework towards the sector.

On Friday the government said it would allow insurance companies to invest in infrastructure projects, while last month India cut the withholding tax for overseas borrowing for the sector.

Construction firm IVRCL gained 4.6 percent after already gaining 4.4 percent, while NCC Ltd

rose 2.2 percent, having gained 10.47 percent over the past four sessions.

Lenders with bigger exposure to infrastructure also gained: Yes Bank

rose 1.7 percent after earlier hitting a record 402.50 rupees, while IDFC posted its highest close since April 2011.

Cement companies extend a recent rally, helped as well by hopes for increased construction activity after the end of the monsoon period.

Ambuja Cements rose 2.6 percent after earlier hitting a record high at 216.30 rupees.

Meanwhile, shares in Indian financial companies with insurance units rallied after the government proposed on Monday to ease some of the taxes affecting the sector, while easing some of the requirements of pension products sold via banks.

Investors are hopeful the government will next increase the foreign direct investment limit in the sector to 49 percent from 26 percent, although that would require parliament approval.

Max India

surged 6.1 percent, after earlier hitting its highest since December 2009.

Bajaj Finserve

rose 3.5 percent, while Aditya Birla Nuvo gained 1.2 percent However, Infosys

fell 1.2 percent on concerns the software services exporter may cut guidance when it reports quarterly results this month, because of a recent appreciation in the rupee

and potential wage hikes.

Auto shares that reported weaker-than-expected sales also fell.

Hero MotoCorp shares fell 1.6 percent after September vehicle sales fell 26 percent, while Bajaj Auto shares fell 1.6 percent after sales last month declined 14 percent.

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FACTORS TO WATCH

* Euro steady as expectations of Spanish aid deal persist

* Oil falls as economic data dims demand outlook

* Shares, oil slide on growth concerns

* Foreign institutional investor flows

* For closing rates of Indian ADRs

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(Additional reporting by Abhishek Vishnoi; Editing by Rafael Nam)

((manoj.dharra.reuters.com@reuters.net)(+91 22 61807243))

Keywords: MARKET INDIA STOCK/CLOSE