The BSE Sensex rebounded in late trade on Wednesday to post its highest close in 12 weeks, as metal producers and auto makers jumped, although investors were doubtful the rally could be sustained after a rise of nearly 12 percent so far this year.

Auto makers rose on better-than-expected January sales, with top carmaker Maruti Suzuki (MRTI.NS) gaining 2.4 percent to its highest close in five and a half months after it reported its first monthly sales rise since May last year.

No.2 lender ICICI Bank (ICBK.NS) fell 1.4 percent after surging nearly 6 percent in the previous session, while top mortgage lender Housing Development Finance Corp (HDFC.NS) fell 1.3 percent after private-equity firm Carlyle Group CYL.UL was said to have sold a quarter of its stake in the company.

The main 30-share BSE index rose for a second straight day to close 0.62 percent higher at 17,300.58, with 19 of its components rising. It was the index's highest close since November 9.

I think February is going to be difficult, said Gajendra Nagpal, chief executive of Unicon Financial Intermediaries in New Delhi. One must also take into account that stock valuations are becoming reasonably expensive. Also, there are things like the elections and the budget, he added.

The benchmark posted its best January rise in 18 years, rallying 11.3 percent on a surge in foreign fund investments, after losing nearly a quarter of its value last year.

Foreign funds have been net buyers of about $2 billion of shares in January, compared with net outflows of about $500 million last year.

Elections in five states, including in key states Uttar Pradesh and Punjab, end in early March. A good showing in the state elections would be a boost for the Congress party that runs the federal government and would help revive stalled policy reforms.

The finance ministry is expected to present its annual budget in March.

Charts also show the market is hovering near overbought territory. The benchmark's 14-day Relative Strength Index was at 68.25 at Wednesday's close. A reading above 70 typically indicates overbought conditions. Also, the main index faces resistance at 17,315, its 200-day moving average.

HDFC, the country's biggest mortgage lender, dropped 8.95 rupees to 688.90 after about 20 million shares, or 1.3 percent of its outstanding shares, changed hands in block deals. Carlyle sold a quarter of its stake in the company, two sources with direct knowledge said.

Tata Motors (TAMO.NS) gained 1.9 percent after it reported January sales rose 16 percent. Mahindra & Mahindra (MAHM.NS), which posted a 22 percent rise in January sales, ended 2.2 percent higher.

Top steelmaker Tata Steel (TISC.NS) jumped 4.5 percent, while Jindal Steel & Power (JNSP.NS) surged 6.3 percent, leading a rally in metal stocks after news that the factory sector in China - a key consumer of natural resources from oil to metals - unexpectedly expanded slightly in January.

India's manufacturing sector grew at its fastest pace in eight months in January as factory output surged the most on record on increased domestic and foreign demand, a business survey showed on Wednesday.

The metal sector index closed 3 percent higher.

The 50-share NSE index gained 0.7 percent to 5,235.70. In the broader market, there were more than two gainers for every loser on a heavy volume of about 929 million shares.

European stocks were trading more than 1 percent higher, while the MSCI world equity index gained 0.45 percent.

STOCKS THAT MOVED

* Jet Airways (JET.NS) rose 5 percent, Kingfisher Airlines (KING.NS) added 3.3 percent and SpiceJet (SPJT.BO) surged 9.2 percent after Indian Oil Corp (IOC.NS), the country's biggest oil refiner, said it will cut jet fuel prices.

* Jaiprakash Associates (JAIA.NS) rose 4.2 percent to 72.80 rupees. The company said cement dispatches rose 27 percent from a year ago to 1.96 million tonnes in January.

TOP THREE BY VOLUME

* Suzlon Energy (SUZL.NS) on 40.3 million shares

* IFCI Ltd (IFCI.NS) on 37.1 million shares

* GVK Power & Infrastructure (GVKP.NS) on 33.9 million shares