BSE Sensex up 5.5 pct on rate cut, stimulus hopes

MUMBAI (Reuters) - The BSE Sensex rose 5.5 percent on Thursday to its highest close in more than two weeks as expectations for an interest rate cut received a boost from slower-than-expected rise in inflation.

Banks, automobiles and construction companies were among the gainers after a government official said the authorities were working on a stimulus package and rate cuts to revive support sagging growth.

Top lender State Bank of India rose 6.6 percent to 1,169.30 rupees and the No. 2 ICICI Bank climbed 8.8 percent to 364.20 rupees as annual inflation dropped to a seven-month at 8.4 percent on Nov. 22, below the previous week's annual rise of 8.84

percent, and well below market estimates of 8.91 percent.

A senior government official told Reuters the Reserve Bank of India (RBI) was likely to lower interest rates soon and the government was planning excise duty cuts for the automobile sector and also a package for the infrastructure sector.

"Clearly, focus is now on growth and we can expect rate cuts from the RBI and fiscal support from the government," said Anubhuti Sahay, economist at Standard Chartered bank in Mumbai.

Leading construction firm Larsen & Toubro rose 8.3 percent, while Jaiprakash Associates climbed 13.8 percent and Reliance Infrastructure gained 7.5 percent

on hopes a stimulus package would help spending.

The 30-share BSE index rose 5.51 percent, or 482.32 points, to 9,229.75, its best close since Nov. 17, with all of its components in the positive territory.

"What we saw today was a relief rally. Global cues are still a concern," said Deven Choksey, CEO and managing director of K R Choksey Shares. "Nothing is going to improve so soon so fast."

The benchmark index has lost 54.5 percent so far this year, with foreign investors pulling out a net 13.8 billion.

Energy group Reliance Industries contributed the most to the rise in the index, adding 8.4 percent to 1,159.30 rupees, while Tata Steel was the leading gainer

climbing 13.8 percent to 187.50 rupees.

Tata Motors raced 13.3 percent to 150.90 rupees on hopes lower interest rates and a cut in excise tax would help revive sluggish sales.

In the broader market, gainers outweighed losers in a ratio of more than 2:1 on relatively higher volume of 299 million shares.

The 50-share NSE index rose 4.95 percent to 2,788.


STOCKS THAT MOVED

* Nava Bharat Ventures Ltd jumped 20.3 percent to 119.50 rupees after the diversified company said its board would consider buyback of shares on Dec. 12.

* GVK Power & Infrastructure Ltd rose 7.4 percent to 18.80 rupees after its subsidiary, in consortium with BHP Billiton Petroleum International Pty Ltd, was awarded deep water blocks off India's west coast.

* Hindustan Oil Exploration climbed 6.1 percent to 62.45 rupees after the firm said it was awarded two exploration oil blocks by the Indian government.


MAIN TOP 3 BY VOLUME

* Unitech on 31.9 million shares.

* Suzlon Energy on 24.7 million shares.

* GVK Power on 18.2 million shares.