Markets gain after U.S. Fed holds off raising rates

MUMBAI (Reuters) - India's stock markets, rupee and bonds gained on Friday on rising expectations the Reserve Bank of India (RBI) will have scope to cut key lending rate later this month now that the U.S. Federal Reserve has kept its interest rates unchanged.

The Fed on Thursday cited worries about the global economy as a key factor compelling it to keep its monetary policy unchanged for now.

Traders had feared a rate hike on Thursday would have sparked volatility in emerging markets and kept the RBI from cutting the repo rate for a fourth time this year at its policy review on Sept. 29.

The broader Nifty rose 1.3 percent to 8,006 points at 9:50 a.m. The 8,000 level was last seen on Aug 31.

The benchmark 10-year bond fell 4 basis points to 7.71 percent, a level last seen on Aug. 20.

The rupee was trading at 66.1950/2000 per dollar, from its previous close of 66.4550/66.4650.

(Reporting by Neha Dasgupta and Karen Rebelo; Writing by Rafael Nam; Editing by Gopakumar Warrier)