Sensex rises 1 percent, holds on to gains

MUMBAI (Reuters) - India's stock markets rose about 1 percent on Wednesday, holding on to gains from the previous session with upbeat global markets and the Reserve Bank of India's bigger-than-expected rate cut on Tuesday continuing to boost sentiment.

Indian shares tracked other Asian markets that were up between 1 and 3 percent. European stocks also edged higher in early trade.

The RBI cut its policy interest rate to a 4-1/2 year low of 6.75 percent on Tuesday, in a bigger-than-expected move and also allowed for steady increase in foreign investment limit in government securities.

The RBI's policy has achieved a twin objective of protecting the rupee through greater foreign investments in government securities and allowing domestic banks to lend more, Deven Choksey, managing director at KR Choksey Securities said.

The benchmark BSE Sensex was up 1 percent after earlier rising as much as 1.17 percent, while the broader Nifty gained 0.84 percent after rising as much as 1.05 percent earlier in the day.

Both indexes were on track to mark their highest close since Sept. 21.

All sectors were in the green with the exception of bank stocks that saw some profit taking.

The gains were driven by blue-chips stocks, with Infosys rising 2.9 percent, ITC gaining 2 percent and Reliance up 2 percent.

Other large cap gainers were Bharti Airtel , up 4.7 percent, while Hindustan Unilever gained 3.4 percent.

(Reporting by Karen Rebelo in Mumbai; Editing by Anand Basu)