* Russian stocks up more than 3 pct
* Sentiment lifted as Moscow orders troops back to base
* Investors wary of economic effect of Ukraine crisis
By Jason Bush and Zlata Garasyuta
MOSCOW, March 4 (Reuters) - Russian shares picked up on Tuesday as investors held out hope for an easing of the crisis in Ukraine after Moscow ordered troops on exercise in western Russia back to base.
The mood was noticeably calmer after panic selling on Monday when escalating tensions between Ukraine and Russia had triggered double-digit losses in Moscow's main stock indexes and forced the central bank to unexpectedly raise interest rates - by a hefty 150 basis points - and burn its way through as much as $12 billion of reserves to prop up the rouble.
At 0930 GMT on Tuesday the rouble-denominated MICEX share index had rebounded 3.4 percent to 1,333 points, while the dollar-denominated RTS index was up 3.7 percent at 1,157 points.
"People are bored of expecting a bad scenario in Ukraine and have started to believe that there will be no military scenario and a confrontation of the Ukrainian army with Russia won't happen," said Oleg Dushin, senior analyst at Zerich Capital Management.
"The fear that Russian troops might go into to, say, Kharkiv (in eastern Ukraine), isn't now on the agenda. You could say that the question of a Third World War has been removed," he said.
The rouble stabilised, after sliding 2 percent on Monday. At 0930 GMT it was up 0.4 percent to 36.38 against the dollar and 0.3 percent to 50.01 against the euro.
Against the dollar-euro basket it was up 0.5 percent at 42.43.
In a note to investors, Mattias Westman, founding partner of Prosperity Capital Management, a major portfolio investor in Russia, said "a series of bad decisions has been made by all sides in this situation" in Ukraine, but that cooler heads were now expected to prevail.
"The situation, in the last day or so, appears to have stopped escalating and different parties appear to be trying to find a peaceful solution," he wrote.
Investors, however, continued to be wary about the economic implications of Russia's involvement in the Ukraine crisis.
The United States said on Monday that Russia had violated international law with its military intervention in Ukraine and that it would look at a series of economic and diplomatic sanctions to isolate Moscow.
A salesman at a Russian investment company said that institutional investors still expected a wave of outflows from Russia and the region this week.
He added that "the market is pricing a completely different valuation range for Russia as a consequence of recent events" because of the increased risk caused by Putin's unpredictability and economic difficulties that Russia may experience for an extended period.
Vladislav Silaev, trader at Alfa Capital, said the market had received a "breather" but was still waiting for more clarification on the Ukrainian situation.
"When the further development of events becomes more-or-less clear then it would be worth taking a look at murdered liquid Russian stocks," he said.
Russia's finance ministry announced on Tuesday it was suspending purchases of foreign currency on the domestic market to replenish its Reserve Fund because of high volatility on financial markets.
The purchases, equivalent to 3.5 billion roubles ($95.7 million) a day over three months, had been one of the factors weighing on the rouble.
The central bank announced on Tuesday it had moved the rouble's floating corridor by an unusually large 35 kopecks to 35.75-42.75 against the basket the previous day.
On Monday, the bank said it was increasing the intervention threshold to move the corridor by 5 kopecks to $1.5 billion from $350 million, and that it would revise its intervention parameters on a daily basis.