(Recasts to lead on stocks, updates prices)
BUENOS AIRES, June 21 (Reuters) - Argentine stocks surged on Thursday after index provider MSCI upgraded the country to its emerging markets index a day earlier, a respite from months of dismal economic news for market-friendly President Mauricio Macri in recent months.
The local Merval stock index opened up nearly 6 percent, rising further later to trade up 7.8 percent as of 11:56 local time (1456 GMT).
Utilities and banks led the advance, with Grupo Supervielle up 10 percent at 86.1 pesos ($3.13) and Banco Macro up 11.3 percent at 200 pesos.
Before Thursday's gains, stocks had been negative on the year, damaged by downward revisions to the country's growth forecast as the central bank tightened monetary policy to fight inflation running at higher than 25 percent annually and to stem a run on the peso currency.
The currency volatility prompted Macri to turn to the International Monetary Fund (IMF) for a $50 billion credit line. The first disbursement of $15 billion arrived on Wednesday, and the central bank outlined plans to auction $7.5 billion of that in the coming months to finance the budget.
The upgrade means funds that track the emerging markets index will now be able to invest in foreign-listed shares of Argentine companies. The Global X MSCI Argentina exchange-traded fund, which is composed of that index, was up 8.8 percent in premarket trading on Thursday.
But local stocks, as well as other Argentine assets, were benefiting from improved sentiment. The peso currency continued its recovery from record-lows touched last week, rising 0.7 percent to trade at 27.54 per U.S. dollar.
Argentina's country risk - a measure of the spread between its bond yields and those issued by other governments - was down 9 points. Treasury Minister Nicolas Dujovne said on Wednesday that the MSCI upgrade would lower the country's borrowing costs.
Analysts said the upgrade could also revive the pipeline of initial public offerings (IPOs) of Argentine companies, which had been dormant since volatility derailed planned listings earlier this year. The top shareholder in small cap oil company Madalena Energy said the move "bodes very well" for its planned listing on the Buenos Aires bourse.
Shares in Bolsas y Mercados Argentinos, which operates the stock exchange, were up 16 percent at 397 pesos. (Reporting by Luc Cohen; Editing by Bernadette Baum)