Banking stocks rise on 'no interest rate hike' buzz

The Bombay Stock Exchange's Sensex rose the most in almost two weeks, paced by banking stocks on speculation that the central bank will avoid raising interest rates to curb inflation and instead rely on the government to limit commodities prices.

ICICI Bank, the nation's second-largest bank by assets, rose the most since March 25. Sixteen out of 18 banks making up the Bombay Stock Exchange's banking index rose.

Reliance Industries, the nation's largest company by market value, rose to its highest in more than a month on its plans to explore for oil in Latin America and to enter drilling services.

"India initially seems to be tackling inflation by ensuring supplies of commodities are increased and their prices checked rather than by managing liquidity through interest rates," said Rajesh Jain, chief executive officer at Pranav Securities.

"Despite rising inflation and other perceived problems, more than 7 per cent growth is expected and the market is catching up to that reality."

The Sensex gained 413.96 points, or 2.7 per cent, to 15,757.08, the most since March 25. The gauge of 30 companies fell 6.3 per cent last week. The S&P CNX Nifty rose 114.20, or 2.5 per cent, to 4,761.20. Inflation accelerated 7 per cent in the week ended March 22, the fastest pace in more than three years, mainly on rising commodity and food prices.

The government has scrapped import duty on crude edible oil and banned the export of rice and pulses. It has also urged steelmakers to cut prices of the alloy.

ICICI Bank gained Rs 45.6, or 6 per cent, to 809.30 and Reliance Industries advanced Rs 83.50, or 3.6 per cent, to 2,405.70. Reliance, a petrochemicals maker, has decided to shut down 950 of the 1,250 gasoline and diesel outlets it runs because of losses, the company said.

"This shutdown is positive for the company," said Deven Choksey, chief executive officer at K R Choksey Shares & Securities, which manages $550 million for wealthy individuals. "There are higher margins to be had in export markets and Reliance's refinery is already configured for that."