Sensex posts highest close in two months

Mumbai: Indian shares rallied 3.2 per cent yesterday to their highest close in two months as rate cuts and an economic package to boost faltering economic growth drove financials, cement and autos higher.

Sentiment was also lifted after markets across the world climbed as low prices and hopes for a global economic recovery later this year prompted a shift into riskier assets.

After markets had closed on Friday, the central bank slashed short-term interest rates by one percentage point and the government unveiled plans to increase foreign inflow of funds.

"We believe the measures to enhance credit availability and the measures to boost infrastructure are relatively stronger measures," analyst Manishi Raychaudhuri at BNP Paribas said.

Reliance Industries jumped 6.4 per cent to Rs1,365.75, its biggest single-day percentage rise in nearly three months, after oil prices climbed three per cent amid rising tension in the Middle East.

Higher oil prices would lift Reliance's refining margins and the economy boosting measures by the government could raise demand for fuel and petrochemicals, traders said.

Construction, cement, financials and auto firms rose on hopes the rate cut and federal government moves to draw more funds into the country will boost demand.

The 30-share benchmark index rose 3.19 per cent, or 317.38 points, to 10,275.60, its highest close since November 10. Twenty-three of its components rose. The benchmark had risen 6.7 per cent last week.