* NSE index up 0.61 pct, BSE index 0.54 pct higher
* Nifty PSU bank index up 1.6 pct
* Market seeing corrective recovery - analyst
By Jessica Kuruthukulangara
Dec 7 (Reuters) - Indian shares bounced back after two days of losses on Thursday, led by lenders such as State Bank of India SBI.NS on expectations that the government would soon reveal details of a recapitalisation plan.
Reserve Bank of India Governor Urjit Patel said on Wednesday the government would "in coming days" detail how it plans to inject an announced $32 billion into state-run lenders, which was announced in October. an RBI order mandating banks to lower the merchant discount rate they charge on debit cards did not affect sentiment. broader gains were capped ahead of elections in the western state of Gujarat due this weekend, in a critical test for Prime Minister Modi.
Polls indicate a victory for the ruling Bharatiya Janata Party (BJP), but with a greatly reduced majority. Results are due later this month. is largely seen as a corrective recovery in the market because it had gone into an oversold territory," said Deven Choksey, promoter, KR Choksey.
"Markets will now look out for the Gujarat election outcome. There may be some recovery in the markets ahead of the earnings season and the government budget next month," he added.
The indexes had fallen in six of the previous seven sessions.
The Nifty PSU bank index .NIFTYPSU gained as much as 1.6 percent, with State Bank of India SBI.NS and Bank of Baroda Ltd BOB.NS rising more than 1 percent each. (India) Ltd GAIL.NS , the top gainer on the NSE index, rose as much as 5.1 percent to a record high.
IRB Infrastructure Developers Ltd IRBI.NS slid as much as 6.1 percent after the company said the Central Bureau of Investigation has filed charges against it over alleged illegal purchases of government land.
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