MARKET EYE-Smaller Indian banks gain on foreign takeover hopes

* Small to mid-sized private Indian banks rally on hopes they could become acquisition targets for foreign banks.

* The Reserve Bank of India on Tuesday said it will treat foreign banks operating in the country on nearly equal termswith local lenders should they move to a wholly owned subsidiary structure.

* Foreign banks would only be allowed to buy a local private-sector lender after a review of the overall extent of foreign bank penetration, the central bank said in the release.

* Lakshmi Vilas Bank gains 6.3 percent, Development Credit Bank rises 4.8 percent, Karnataka Bank is up 6.2 percent, Dhanlaxmi Bank is 3.9 percent higher while City Union Bank gains 2.5 percent.

* However, large private banks edge down on profit-taking after a recent rally. ICICI Bank is down 0.7 percent, HDFC Bank falls 0.5 percent.

* The main share index trading up 0.2 percent after a flat start. Traders expect the index to continue seeing some consolidation in the near-term.

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