Mumbai: The benchmark Sensex surged 376 points Monday, clocking its biggest gain in seven weeks, ahead of retail inflation figures and on expectations the US Federal Reserve would ease tapering after disappointing jobs data.
Investors also expect the RBI to keep interest rates unchanged in a bid to support growth after the Index of Industrial Production contracted 2.1 percent in November. There were hopes of inflation easing amid increased availability of winter crops.
There was buying across the board as 11 out of the 12 BSE sectoral indices advanced, led by IT, Teck, Oil & Gas, Banking and Capital Goods stocks. Only the Healthcare index fell.
Heavyweights Infosys, TCS, Reliance Industries and ICICI Bank contributed the most to the gains in the Sensex.
The 30-share S&P BSE Sensex opened higher and stayed in positive terrain through the day. It ended at 21,134.21, a rise of 375.72 points or 1.81 percent. It was the biggest gain since November 25, when the index added 387.69 points.
The Fed said it would reduce its bond-buying programme, which has been a source of liquidity for most Asian and emerging markets, from this month. US employment rose at the slowest pace in three years in December, according to a government report.
"Markets rose sharply on Monday, likely buoyed by the weak payroll data in US, which re-ignited optimism on the Fed taper programme. Expectations on the CPI inflation data which is due post-market hours, also kept the markets up," said Dipen Shah, Head - Private Client Group Research at Kotak Securities.
The 50-share CNX Nifty on the National Stock Exchange shot up 101.30 points, or 1.64 percent, to 6,272.75.
"The markets seem to be anticipating a healthy inflation figure, since that would reinforce that the RBI's decision to not raise the headline repo rate last month was the correct decision," said Raghu Kumar, Cofounder of RKSV.
Ahead of the RBI's monetary policy review on January 28, Economic Affairs Secretary Arvind Mayaram has pitched for shifting the policy focus to growth as interest rates do not have a bearing on food inflation.
Foreign institutional investors bought shares worth a net Rs 68.16 crore last Friday, according to provisional data from the stock exchanges.
"Markets were buoyed by some renewed buying spree by the FII community who have realised that it is pretty unlikely that Fed will go more aggressive on its tapering process," said Jignesh Chaudhary, Head of Research at Veracity Broking Services.
"The markets are anticipating some positive news from the inflation figures scheduled to be released later in the evening, which will prompt RBI to take some growth-boosting measures that will be good for the market," he said.
IT shares led the 21 gainers on the Sensex. TCS surged 3.88 percent, Infosys 3.29 percent, ICICI Bank 3.09 percent, ONGC 2.94 percent and Reliance Industries 2.58 percent.
Tata Power declined 1.99 percent and Sun Pharma 1.19 percent.
Among the S&P BSE sectoral indices, IT rose 2.92 percent, Oil & Gas 2.24 percent, Bankex 2.04 percent and Capital Goods 1.55 percent.
The market breadth remained negative as 1,415 stocks fell, 1,327 stocks rose and 134 ruled steady.
Key indices in Hong Kong, South Korea and Taiwan ended higher while those in China and Singapore were lower. The Japanese markets were closed today.
European markets were trading marginally higher as indices in France, Germany and UK moved up.