Sensex surges over 700 points, marks biggest daily gain in eight months

MUMBAI (Reuters) - The BSE Sensex and Nifty rose more than 2.5 percent on Thursday, marking their biggest daily gain in eight months, after blue-chips led by interest rate-sensitive stocks surged on hopes the central bank's surprise rate cut will stoke growth.

The NSE bank index rose as much as 4.3 percent to a record high of 19,410.40 after the Reserve Bank of India cut interest rates by 25 basis point and signalled it could cut further, amid cooling inflation and the government's efforts to contain fiscal deficit.

Lower borrowing costs supported by a steep fall in commodity prices, especially crude oil, are expected to boost Prime Minister Narendra Modi's plans to kick-start investments and earnings in Asia's third largest economy.

The Sensex rose as much as 3.1 percent during the day before ending 2.66 percent higher.

The broader Nifty ended up 2.62 percent after earlier rising as much as 3 percent.

The indexes marked their biggest daily gains since May 9, 2014.

(Reporting by Abhishek Vishnoi; Editing by Gopakumar Warrier)