Sensex rises 1.23 percent on reforms, election boost

By Abhishek Vishnoi

MUMBAI (Reuters) - The BSE Sensex and Nifty rose more than 1 percent on Monday to mark their biggest daily gain in more than one week after the government's energy reforms led to a rally in oil firms, while wins by the Bharatiya Janata Party (BJP) in Maharashtra and Haryana elections raised expectations for more reforms.

Removal of diesel price controls and a rise in natural gas prices provided much needed credibility to Prime Minister Narendra Modi's reform agenda, which had come under scrutiny as mere promises, some investors said. His BJP's election gains are also likely to encourage Modi to step up the pace of such reforms.

Diesel deregulation paves the way for a sharper decline in inflation indicators, and investors now expect the Reserve Bank of India (RBI) to cut rates 2-3 quarters ahead of consensus expectations.

Gains also tracked higher global stocks, with strong U.S. data and encouraging third-quarter earnings easing concerns about the pace of global economic recovery and raising appetite for riskier assets.

"Government has no choice but to go for reforms, while falling inflation augurs well for rates," said G. Chokkalingam, founder of Equinomics, a research and fund advisory firm.

India is in a structural bull market so buy on dips, added Chokkalingam.

The benchmark Sensex rose 1.23 percent, or 321.32 points, to end at 26,429.85.

The broader Nifty rose 1.28 percent, or 99.70 points, to end at 7,879.40, closing above the psychologically important 7,800 level.

Both indexes marked their biggest daily gain on Monday since Oct. 9.

State-run oil and gas companies led the gainers after government ended diesel controls and raised gas prices on Saturday.

Hindustan Petroleum Corp jumped 7.4 percent, Bharat Petroleum Corp rose 4.5 percent, while Indian Oil Corp gained 3.8 percent.

Oil explorers also surged. Oil and Natural Gas Corp rose 5.5 percent and Oil India gained 1.6 percent.

Auto stocks were also higher, as removal of price controls on fuel is seen helping demand for cars.

Maruti Suzuki India gained 2.1 percent, Mahindra and Mahindra rose 0.6 percent and Ashok Leyland ended up 2.1 percent.

JSW Energy gained 3.6 percent as increase in local gas prices is expected to benefit coal-based power producers.

Idea Cellularrose 4.7 percent ahead of its results later in the day.

However, conglomerate Reliance Industries ended 0.3 percent lower as the gas price hike was seen lower than expected.

(Editing by Prateek Chatterjee)