* Fanuc up on upbeat Morgan Stanley MUFG note * Renesas sags on capital-raising plan * Nomura pressured by insider trading case TOKYO, May 28 (Reuters) - Japan's Nikkei average firmed on Monday after eight straight weeks of declines, helped by gains from widely held Fast Retailing and Fanuc Corp which outweighed Renesas Electronics' sharp tumble. The Nikkei closed up 0.2 percent at 8,593.15, staying firmly above the 8,500 support level but stopping short of its 5-day moving average of 8,604.6. Trading volume on the main board hit a three-week low at just 1.3 billion shares traded, with a U.S. market holiday coming up this week. "Hedge funds are due to release their mid-term appraisals soon so they're probably indulging in a little window dressing to keep the Nikkei above 8,500 to protect their positions," said Norihito Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley. The broader Topix index inched down 0.1 percent to 721.11. "The Topix moving in the opposite direction shows you the real mood of the market. The Nikkei would have gone down too if it wasn't for Fast Retailing and Fanuc," Fujito said. Fanuc added 2 percent after Morgan Stanley MUFG raised its price target on the industrial robot maker, saying a recent correction in the stock was overdone, contributing 14.8 points to the Nikkei average, while widely held Fast Retailing gave 10.8 points with its 2.2 percent gain. Renesas sank 10.6 percent to a record low after reports that it will sell off its loss-making operations and cut 12,000 jobs. NEC Corp, one of its parent companies, tumbled 9.2 percent on the news. Risk sentiment has been eroded in recent weeks by growing concern about the impact of Greece's possible exit from the euro zone and slowing global growth, with the Nikkei average capping its eighth week of declines on Friday, its worst weekly losing run in 20 years. "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 average price-to-book ratio of Nikkei companies now stands at 0.9, less than half of the S&P 500, which stands at 2.1. The market is still in oversold territory, with its 14-day relative strength index at 29.2. An RSI of less than 30 is considered oversold. Gains of 1.6 percent for Canon Inc and 8.2 percent for Sharp Corp after a recent battering also supported the market. Nomura Holdings pared losses in the afternoon to close down 0.4 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. "The market is bearish already but this could be a reason for Nomura to be sold off even more," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities. "It calls Nomura's competence into question." A trader said the Topix was likely to hold firm at 700, having bounced twice from such a level in March 2009 and November 2011, and recommended investors buy Topix call options at 755 with a September expiry. To finance the purchase of call options, the trader suggested selling Topix put options at 675 in similar maturity.