Sensex snaps losing streak, up 208 points

The Sensex rose 1.1 per cent on Thursday, ending a three-day losing streak, as interest rate-sensitive stocks such as ICICI Bank rose after lower-than-expected core inflation data raised hopes the Reserve Bank of India (RBI) would ease monetary policy next week.

The gains came after core wholesale price inflation was estimated to have risen 3.8 per cent in February from a year earlier, according to a Reuters snap survey of three analysts and traders on Thursday, below expectations of a 4.2 per cent rise.

The data, combined with the government's pledge to stick to its fiscal deficit target, raises hopes the RBI will cut the interest rate by 25 basis points at its policy review on Tuesday.

RBI Governor Duvvuri Subbarao called the recently unveiled 2013-14 government budget 'responsible' in a speech in London yesterday, further raising hopes for a rate cut, as the central bank had previously expressed concerns about the fiscal deficits.

"At least a 25 basis point cut is getting discounted in the market and RBI policy remains key," said Daljeet Singh Kohli, head of research at IndiaNivesh Securities.

The benchmark BSE Sensex rose 1.07 per cent, or 207.89 points, to 19,570.44, marking its biggest single-day percentage gain since Friday. The broader Nifty rose 0.99 per cent, or 57.75 points, to 5,908.95, closing above the psychologically important 5,900 level. Rate-sensitive stocks such as State Bank of India gained 3.5 per cent, while ICICI Bank rose 2.3 per cent.

Shares of top private sector lenders ICICI Bank, HDFC Bank and Axis Bank gained, recovering from morning falls sparked by accusations from an independent investigative journalist that the three had engaged in widespread money laundering.

All three banks said they would investigate the allegations, while emphasising they complied with all regulations and adhered to high conduct standards.