* Renesas sags on capital-raising plan * Fanuc up on upbeat Morgan Stanley MUFG note * Nomura falls; sources say linked to 2nd insider case By Dominic Lau TOKYO, May 28 (Reuters) - Japan's Nikkei average steadied on Monday after marking eight straight weeks of declines last week, although chipmaker Renesas Electronics Corp plunged after sources said it was planning to raise $1.3 billion to fund restructuring. Renesas sank more than 11 percent to a record low on the news, which also sent NEC Corp, one of its parent companies, tumbling. But gains for index heavyweight Fanuc Corp helped offset those falls, after Morgan Stanley MUFG raised its price target on the industrial robot maker, saying a recent correction in the stock was overdone. By the midday break, the Nikkei was flat at 8,579.03, holding below its five-day moving average near 8,601, an d still in "oversold" territory, wi th its 14-day relative strength index at 28.4. Last week, the benchmark logged its worst weekly losing streak in 20 years, and is down 16.3 percent since hitting a one-year high on March 27 as concerns about the impact of a possible Greek exit from the euro zone and worries over slowing global growth intensified. "The market has been panicking for eight weeks. It's probably not sensible to forecast exactly when it will cease panicking. It's important to consider what it focuses on when it ceases panicking, which is probably the extreme valuations," said Nicholas Smith, Japan strategist at CLSA. "The further it falls, the more it should rebound when the market comes to its senses," he said, pointing to real estate companies and Sumitomo Mitsui Financial Group as among stocks on which to focus. Gains in Canon Inc and Sharp Corp after a recent battering also supported the market. They climbed 0.9 and 2.1 percent respectively. Renesas Electronics ended the morning session down 10 percent after earlier falling to a record low on news it will sell loss-making operations and cut at least 12,000 jobs as Japan's chip sector grapples with its biggest shake-out in a decade. NEC, the most heavily traded stock by volume, also fell 10 percent. A trader at a foreign bank said Renesas was impossible to short. According to research firm Data Explorers, 89.09 percent of Renesas stock that is available to be borrowed was already out on loan as of May 24. The broader Topix slipped 0.3 percent to 719.67. Trading volume on the main board after the midway point was light, at 33 percent of its full daily average for the past 90 days. Underlining the gloomy outlook, the Topix's one-month earnings momentum - analysts' earnings upgrades minus downgrades as a total of estimates - slowed to 0.1 percent from 5.4 percent last month after rebounding in recent months, Thomson Reuters Datastream data showed. However, Deutsche Bank said in a note that domestic investors were net sellers of Nikkei futures contracts by 8.1 billion yen last week and historically, when they are net sellers it tends to be positive for the stock index over the subsequent two weeks. Also weighing on the market, Nomura Holdings dropped 1.2 percent after Japan's largest broker was linked to a second insider trading case involving a fund management arm of Sumitomo Mitsui Trust Holdings Inc. Sumitomo Heavy Industries Ltd sagged 6.4 percent after the company said on Friday that its contract with the Ministry of Defense had been suspended due to over-reporting of expenses.