(Updates to close)

By Bharath Rajeswaran

Oct 10 (Reuters) - Indian shares ended marginally higher

on Thursday as a drop in information technology stocks weighed

on gains in financials, while markets awaited a key U.S.

inflation report.

The Nifty 50 index rose 0.07% to 24,998.45, while

the S&P BSE Sensex added 0.18% to 81,611.41. The

indexes rose about 0.6% each earlier in the session.

IT index fell 1.25%, snapping a four-session

winning streak, ahead of the second-quarter earnings of Tata

Consultancy Services due after market hours. TCS fell

0.6%.

Its peers Tech Mahindra and Infosys

fell about 3% and 2%, respectively, and were among the top five

Nifty 50 losers.

While the outlook for Indian markets remains positive, a

moderation in earnings could bring down inflated valuations and

temper investor expectations, said Yogesh Patil, chief

investment officer of equity at LIC Mutual Fund AMC said.

Besides earnings, TCS' commentary and guidance will be

crucial to ascertain the health of the IT sector, which has been

hurt by weakness in client spending in the U.S.

The outlook for the sector has improved in the last few

weeks, following an outsized rate cut by U.S. Federal Reserve

and data signalling a soft landing.

Investors now await the U.S. consumer price index data due

later in the day for clues into the Fed's rate cut path.

Since a blowout jobs report last week, bets of a large rate

cut in November have been completely priced out. Odds of a 25

basis points cut are at 82%.

Lower interest rates could spur spending in the U.S.,

which would benefit Indian IT firms as they rely heavily on it

for their contracts.

While IT stocks fell, investor interest in high-weightage

financials due to relatively cheaper valuations kept the

benchmarks afloat.

Financials and banks rose about

1% each, while private banks gained 1.6%.

Kotak Mahindra Bank, HDFC Bank and

IndusInd Bank were among the top five Nifty 50

gainers.

On the flip side, pharma stocks fell 2%, and

was the top sectoral loser by percentage.

(Reporting by Bharath Rajeswaran in Bengaluru; Editing by

Sherry Jacob-Phillips, Mrigank Dhaniwala and Varun H K)