By Darshana Sankararaman
(Reuters) - Indian shares rebounded on Thursday, mirroring gains in Asia and on Wall Street overnight, with banks rallying on hopes their coffers would swell as a government plan to withdraw larger bank notes sparks increased deposits.
Banks' are expected see improved liquidity when people start tendering cash after the government decided to withdraw 500 and 1,000 rupee notes.
The broader NSE index was up 1.83 percent at 8,586.25 by 0615 GMT, after losing 6.34 percent on Wednesday.
The benchmark BSE index was 1.69 percent higher at 27,714.09.
Financial stocks were among the biggest percentage gainers on the NSE index, as investors welcomed the government's decision to withdraw higher denomination banknotes.
State Bank of India surged as much as 8.75 percent. Banks while ICICI Bank Ltd rose 6 percent.
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Market sentiment also got a boost after global investors turned hopeful about generous tax cuts and higher infrastructure and defence spending in the U.S. following Donald Trump's victory.
The S&P 500 index rose 1.11 percent, sparking gains across Asia. The MSCI's broadest index of Asia-Pacific shares outside Japan bounced 1.8 percent after slumping 2.4 percent on Wednesday.
"Markets over-reacted yesterday to Trump's win, and in anticipation that Trump is going to be elected, more people had gone short on the market," said R.K. Gupta, managing director, Taurus Asset Management.
The Nifty Pharma index rose for the second consecutive day and was up 2.52 percent on hopes Trump administration would avoid tough action on drug pricing.
Meanwhile, the Nifty Realty index recouped heavy losses recorded on Wednesday and rose as much as 5.65 percent. Property developers are seen as one of the most affected by the withdrawal of larger bills, given a significant portion of transactions are done in cash.
Among other gainers, Tata Consultancy Services, a majority-owned unit of Tata Sons, rose 1.40 percent after saying Tata Sons had nominated Ishaat Hussain, a director at some Tata companies, as interim chair of TCS to replace Cyrus Mistry.
A move to replace Mistry as chairman of TCS had been anticipated after he was ousted as chairman of Tata Sons in a surprise move last month.
(Reporting by Darshana Sankararaman in Bengaluru; Editing by Vyas Mohan)