* Volumes thin, despite derivative contracts expiry * Infosys, Larsen & Toubro lead gains * State-run oil firms slide as diesel price hike deferred (Updates to close) By Prashant Mehra MUMBAI, Dec 30 (Reuters) - Indian shares on Thursday rose 0.7 percent to their highest close in seven weeks in thin year-end volumes, led by Infosys Technologies (INFY.BO), Larsen & Toubro (LART.BO) and gains in some automobile shares. State-run oil marketing firms Indian Oil Corp (IOC.BO), Hindustan Petroleum (HPCL.BO) and Bharat Petroleum (BPCL.BO) fell between 1.5 to 3 percent after India deferred a decision on a possible increase in diesel and cooking gas prices. [ID:nSGE6BS07M] The 30-share BSE index .BSESN ended up 133.04 points, at 20,389.07, with 25 of its components rising. It traded in a narrow range through the session on thin volumes, despite the expiry of monthly derivative contracts on Thursday. "The build up in open interest is subdued and volatility has been low. The market is a little more than fairly valued at this point, so there is still fear that a downside is round the corner," said Deepak Jasani, head of retail research at HDFC Securities. Traders said volumes had dipped as investors avoided building positions before the year end. For the year, the index is up nearly 17 percent, helped by record foreign fund inflows of $28.5 billion into local equities and most investors are optimistic that a robust growth outlook for the Indian economy bodes well for the domestic equities market in 2011. "People are expecting next year allocations to India will be as good or even better," said Gajendra Nagpal, chief executive at Unicon Financial Intermediaries. On Thursday, gains were led by outsourcers on renewed hopes of stability in the U.S. economy, which they count as their largest market. India's No. 2 software services firm Infosys closed up 1.2 percent, while larger rival Tata Consultancy Services (TCS.BO) gained 1.1 percent and No. 3 Wipro (WIPR.BO) added 0.2 percent. Larsen & Toubro, India's largest engineering and construction firm, ended 0.9 percent higher at 1,972.15 rupees, helped by order wins worth $259 million. [ID:nBMA009221] Shares in automakers Tata Motors (TAMO.BO) and Hero Honda (HROH.BO) rose 1.9 percent each, while top carmaker Maruti Suzuki (MRTI.BO) and Mahindra & Mahindra (MAHM.BO) ended marginally higher. Most vehicle makers are expected to announce price increases in early January. State-run fuel retailers were among the worst performers, on worries of under-recoveries. Indian Oil Corp fell 2.8 percent, while Hindustan Petroleum Corp lost 1.8 percent and Bharat Petroleum Corp slipped 1.4 percent. While state-run companies set petrol prices, prices of diesel and cooking fuels continue to be fixed by the government. Sources told Reuters an Indian ministerial panel meeting scheduled for Thursday to discuss a possible rise in fuel prices had been deferred and a new date was yet to be fixed. Shares in state-run explorer Oil and Natural Gas Corp (ONGC.BO), which also shares the subsidy burden on auto fuels, lost 0.6 percent. Weekly food and fuel inflation accelerated for the fourth straight week on higher prices of vegetables, government data on Thursday showed. The food price index rose to a 10-week high of 14.44 percent while the fuel price index climbed 11.63 percent in the year to Dec. 18. [ID:nDEL003806] In the broader market, gainers were ahead of declines in the ratio of 1.33:1, with about 329.5 million shares changing hands. The 50-share NSE index .NSEI closed up 0.7 percent at 6,101.85 points, its highest close since Nov. 15. STOCKS THAT MOVED * State-run Punjab & Sind Bank PUNA.BO closed up 6 percent at 127.05 rupees on its market debut. The company raised 4.8 billion rupees ($107 million) in an initial public offer. * ABG Infralogistics Ltd (ABG.BO) rose 10.7 percent to 211.85 rupees after the company said it plans to buy back up to 875,000 shares at a price of 244.5 rupees each. [ID:nSGE6BT00V] * Pratibha Industries (PRTI.BO) rose 1.9 percent to 68.45 rupees after the company won orders worth 732.8 million rupees. MAIN TOP THREE BY VOLUMES * Punjab & Sind Bank on 25.4 million shares * Suzlon Energy (SUZL.BO) on 9 million shares * Pipavav Shipyard (PIPA.BO) on 5 million shares FACTORS TO WATCH * For technical analysis see: www.reuterstechnicals.com * India rupee holds near 3-wk highs tracking shares [INR/] * Indian bond yields nudge up after food, fuel price data [IN/] * FOREX-Swiss franc buoyed; dollar falls with U.S. yields[FRX/] * Oil hovers above $91, U.S. inventory data in focus [O/R] * Stocks eye two-year high, dollar weak [MKTS/GLOB] * Futures point to slight gains for Wall Street [.N] * For closing rates of Indian ADRs INADR ($1=44.9 rupees) (Additional reporting by Devidutta Tripathy in NEW DELHI; editing by Aradhana Aravindan)

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