Shares in Oil India are expected to rise 5 to 7 percent on debut on Wednesday following lukewarm starts by two recent large listings, although traders said firm demand for the stock should help it hold on to gains.

Oil India, the second state-run firm to go public this year after utility NHPC Ltd, raised $570 million at 1,050 rupees a share in an initial public offering that was subscribed more than 30 times.

It is expected to list between 1,100 to 1,125 rupees a share. The issue did not leave much in the table for investors. said Ambareesh Baliga, vice president at Karvy Stock Broking.

The cushion is pretty small, though it appears to be a good long-term story.

Oil India shares were trading at between 1,090 and 1,110 on the grey market, or unofficial pre-launch trading, which gives an indication for the opening.

Based on the IPO price, Oil India is valued at about 10 times 2008/09 earnings, compared with 17 times for larger state-run rival Oil and Natural Gas Corp, making it a better long-term bet, traders said.

Compared with its peer ONGC, the stock is cheaper, and the company has greater probable reserves and a better exploration pipeline, said Sonam Udasi, vice president at BRICS Securities.

Indian IPOs began to revive around the middle of the year following an 18-month lull after share markets plunged in 2008.

The two major IPOs since August, private utility Adani Power and NHPC Ltd, which together raised $1.9 billion, suffered tepid listings. Traders say another weak debut would dampen investor sentiment and potentially derail government plans for stake sales in other companies.

Indian firms have sold shares worth $15 billion so far this year and have filed regulatory applications for several billion more, leaning on a 75 percent stock market rally this year that has lifted the benchmark index .BSESN to a 16-month highs.

Oil India, which also produces liquefied petroleum gas, had estimated proved and probable crude oil reserves of about 575.4 million barrels as of March 31, 2009.

JM Financial, Morgan Stanley India, Citigroup Global Markets India and HSBC Securities and Capital Markets are the lead managers to the Oil India issue. (Editing by John Mair)