By Swati Bhat

MUMBAI (Reuters) - The rupee gained for a second consecutive session on Monday after the ruling party's success in two state elections and the government's removal of diesel subsidies and a hike in natural gas prices sparked hopes for additional reforms.

The government lifted diesel price controls and raised the cost of natural gas on Saturday, giving market forces greater sway as it seeks to attract energy investment, boost competition and cut subsidy costs.

Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) also made big elections gains in Maharashtra and Haryana, an endorsement likely to encourage him to step up the pace of economic reforms.

"The rupee gained, tracking positive domestic sentiment after the election results and the diesel price deregulation. Positive global stocks also aided but some oil-related dollar buying pulled the unit off highs," said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.

Traders broadly expect the rupee to hold in a 61.00 to 61.70 range against the dollar this week, shortened by market holidays on Thursday and Friday.

The partially convertible rupee closed at 61.36/37 per dollar compared with 61.44/45 on Friday.

The rupee was also helped after Sensex and Nifty rose more than 1 percent on Monday to mark their biggest daily gain in more than one week.

In the offshore non-deliverable forwards, the one-month contract was at 61.68, while the three-month was at 62.27.

(Editing by Prateek Chatterjee)