* Talk of injecting public funds supports market -analyst
* Foreign buying weaker as nuclear outcome, fundamentals unclear-analyst
* Hitachi surges on plant restart report
By Antoni Slodkowski
TOKYO, March 30 (Reuters) - Japan's Nikkei average gained on Wednesday after the dollar rose against the yen, but it remained stuck in a narrow range for a seventh straight session with the risk of a move lower seen increasing as bargain-hunting by foreigners peters out.
Market players also said that the Bank of Japan's purchases of exchange-traded funds under an asset purchase programme adopted to bolster the economy was also lending support to the market, although they warned that the impact would be short-lived.
"Foreigners have stopped piling into shares on dips, and are now mostly staying sidelined, waiting for more information on fundamentals and further developments at the nuclear plant," said Hideyuki Ishiguro, a supervisor at Okasan Securities in Tokyo.
Market players said that investors aiming to get out of losing positions may begin selling around 9,600, keeping a cap on the Nikkei's gains, and that investors may be waiting for the market to fall after the end of the business year on Thursday and again scoop up shares on dips.
"There's a big downside risk ... I think there were some public funds coming in that supported the market yesterday, as the authorities are wary ahead of the end the financial year," Ishiguro added.
A stronger dollar lifted post-quake underperformers like Nissan Motor , which added 1.9 percent. Nissan has lost more than 12 percent since the earthquake and tsunami hit northeast Japan more than two weeks ago.
By the midday break the Nikkei gained 1.2 percent, or 115.60 points, to 9,574.68. The broader Topix index advanced 0.7 percent to 856.03.
Japanese stocks have stayed trapped in a narrow range around 9,500 for seven days.
Both Nissan and Toyota Motor Corp , which have lost a substantial amount of domestic production due to disruptions in their supply chains, were among the most actively traded shares by turnover on the Tokyo stock exchange's main board.
The biggest loser on the market was again the electric and gas sector , down 4 percent, as Tokyo Electric Power dropped another 17.7 percent, adding to a slide to a 47-year low a day earlier as the government pondered whether to nationalise the operator of a stricken nuclear plant.[ID:nL3E7EU01N]
BANKS LOSE
Another big underperformer is the banking sector , down 12.6 percent since the quake, with Mizuho Financial Group facing an inspection by financial authorities and down 2.1 percent at 137 yen on Wednesday, and other banks lower on worries over loans to Tokyo Electric.
"You have to look at all the banks that are lending to the company. It's obvious that investors are going to look at their situation with a huge dose of scepticism," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
The banking sector was 0.8 percent lower on Wednesday.
Japanese shares have lost about 8 percent since the March 11 earthquake and tsunami, and a subsequent nuclear safety crisis, triggered the biggest two-day rout in the market since 1987. In contrast, the MSCI index of Asian shares outside Japan has gained 4 percent.
The dollar rose as a steady rise in U.S. yields gained traction this week after several Federal Reserve policymakers said the central bank would have to start tightening monetary policy soon to avoid inflation.
Shares of Hitachi Ltd jumped 6.5 percent to 428 yen, helped by a Nikkei newspaper report that the electronics giant had partially resumed operations at its biggest factory complex with output expected to return to pre-disaster levels next month. [ID:nL3E7ET31A] (Additional reporting by Chikafumi Hodo; Editing by Edwina Gibbs and Edmund Klamann) Reuters Terminal users can see other related news and rates by double-clicking on: All Nikkei indices <0#.NIKKEI> All shares listed on The benchmark Nikkei ended the day up 1.1 percent or 101.12 points at 9,536.13, Nikkei-225 <0#.N225> N225 index TOPIX index Nikkei Japan 1000 TOPIX sector data Nikkei 300 index TOPIX futures data <0#JTI:> Osaka N225 data <0#JNI:> Chicago N225 data <0#NK:> Top 30 by volume Top 30 by value Total volume Total value 1st section sector RICs All TSE weighted avg Top 30 gainers by pct Top 30 losers by pct Top 30 net gainers Top 30 net losers
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