* FTSE up 0.3 percent
* Banks, miner rally but gains seen limited
* Serco climbs as HSBC upgrades to "overweight"
* J Sainsbury up after trading statement
By David Brett
LONDON, March 21 (Reuters) - Britain's top share index rose early on Wednesday, recovering some of the previous session's losses as investors bought in on the dips in miners and banks ahead of the UK budget announcement due later in the day.
London's blue-chip index was up 19.68 points, or 0.3 percent, at 5,911.09, by 0853 GMT, having shed 1.2 percent on Tuesday as investors were spooked by comments from BHP Billiton over slowing demand from China, which had been bubbling under the surface since the weekend.
The main focus for UK investors on Wednesday will be the UK budget speech from finance minister George Osborne.
"Investors should avoid knee-jerk reactions and continue to do their homework on what is happening for individual firms and their commercial markets and sectors rather than worry too much about George Osborne," said Sarah Modlock, equities specialist at Interactive Investor.
"The only exception to this could be a surprise announcement on fuel duty or VAT which would signal some relief for businesses and customers and could have a positive effect on investor sentiment," Modlock added.
Serco rose 2.5 percent after HSBC upgraded its recommendation on the outsourcer to "overweight" from "neutral", saying the firm is its preferred pick among UK outsourcers that will likely see further pressure from UK government austerity.
Peer Capita, which HSBC rates as "underweight", added 0.6 percent.
The main gainers on the index were the previous session's sharpest fallers, the heavyweight banks and the miners, as investors took the opportunity to pick up cheaper stock.
"We're seeing an early rally but doubts over Chinese demand and the high oil price impacting inflation could hamper momentum," a London-based trader said.
ENRC missed out on the rally, falling 1.6 percent after the miner posted a slight miss in full-year results, according to Numis.
"(ENRC) appears to be putting its skeletons behind it and getting on with business but struggling to gain traction in a difficult market," Numis said.
Insurers bounced too with Prudential up 1.2 percent as Deutsche Bank, Barclays and Panmure Gordon all raised their share price target.
"Although the shares have had a strong run recently, in our view the share price still does not fully capture the inherently higher growth rate (10 percent-plus pa) that Prudential can command," Deutsche Bank said, lifting its price target by 8 percent to 900 pence.
J Sainsbury rose 2.1 percent as Britain's third-biggest supermarket group, beat forecasts for fourth quarter sales growth as it won market share from rivals.
Seymour Pierce said with the shares now trading on 11.3 times 2012 forecast earnings and a 5 percent dividend yield the share price should be supported.
Debenhams, which reported first-half results on Tuesday, rose 3.3 percent as Citigroup raised its rating on the department store firm to "buy" on valuation grounds.
"In the context of the group's current 20 percent PE (price earnings) discount to sector peers, and premium dividend yield, we move to a Buy rating," Citigroup said.
High street retailer Marks & Spencer rose 2.1 percent, but Ted Baker fell 4.5 percent after its results.
Elsewhere, heavyweight Vodafone climbed 1.4 percent, extending gains from the previous session, as Goldman Sachs added the mobile phone operator to its "conviction buy" list.
"With the stock implying negative long-term growth and trading at a discount to peers, we see substantial rerating potential," Goldman said.
And Wolseley, the world's biggest building supplies company, added 2.7 percent, as Credit Suisse raised its target price on the firm ahead of U.S. housing data due out later in the session.
Ex-dividend factors took 3.1 points off the FTSE 100, with Aviva, InterContinental Hotels, Smiths Group and Standard Life all losing their payout attractions.