Indian shares rallied for the third straight session to close at over three-week highs on Tuesday, as bank stocks surged and fears of rate hikes were soothed after the country's central bank said inflation looked set to ease.
Forty of the 50 stocks on the NSE Nifty 50 index (.NSEI) settled higher, helping the benchmark end 1.01% up at 17,486.95. The S&P BSE Sensex (.BSESN) climbed 0.94% to 58,960.60.
"We have to keep an eye on oil prices, but otherwise with respect to domestic inflation, we have had a decent monsoon, so don't expect any big spike in food prices," said Samrat Dasgupta, chief executive officer of Esquire Capital Investment Advisors.
"Maybe the worst of inflation is over, unless there is an oil shock because of the war in Ukraine."
The Reserve Bank of India (RBI) should pause interest rate hikes, despite unacceptably high inflation, to avoid stalling a recovery in economic growth, monetary policy committee member Jayant Varma told Reuters in an interview on Monday. Varma's comments came as the RBI, in its monthly bulletin on Monday, said the country's retail inflation was set to ease from the five-month high hit in September, while economic activity is poised to expand.
In broader equities, Asian and European stocks climbed after Britain's turnaround of a fiscal policy helped improve appetite for risky assets.
In domestic trading, Nifty's public sector bank index (.NIFTYPSU) was the best performer among all sub-indexes, closing nearly 4% higher.
"Benchmark indexes gained, led primarily by the PSU banks as the pick up in the corporate loan cycle and retail loans during the festive season provided much-needed tailwinds," said S. Ranganathan, head of research at LKP Securities.
