The 50-share Nifty opened 120 points higher at 9,116 and the BSE benchmark Sensex surged 431 points to 30,015.
Reserve Bank Governor Raghuram Rajan on Wednesday announced a surprise repo rate cut, the second inter-meeting interest rate cut in less than two months. Repo rate has been reduced by 25 basis points or 0.25 per cent to 7.5 per cent with immediate effect.
The move comes days after Finance Minister Arun Jaitley’s Union Budget announcement. In his Budget, Mr Jaitley had loosened the reins on public spending to drive growth, but promised lower-than-expected borrowing despite raising the fiscal deficit target.
Boosted by the rate cut, rate sensitive stocks came in demand and were witnessing buying. Banking, capital goods and real estate stocks were the leading sectoral gainers on the BSE.
The banking sub-index, Bank Nifty was up nearly 2 per cent 20,317 levels. Capital goods, realty and auto indices were also up 1-2 per cent each.
Meanwhile, the broader markets were trading on a flat note. The BSE mid-cap and small-cap indices were trading up 0.2 per cent each.
From the Nifty basket, DLF was the top gainer. The stock jumped nearly 4 per cent to Rs. 157. Punjab National Bank, Bank of Baroda, Kotak Mahindra Bank, Tata Motors, State Bank of India, ICICI Bank, Axis Bank, HDFC, HDFC Bank and Mahindra & Mahindra were also trading higher by 1.3-3 per cent each.
On the other hand, Hindalco, NMDC, Grasim Industries, Coal India, Zee Entertainment and Reliance Industries were among the notable losers.
At 9:49 AM, the Sensex was trading 282 points higher at 29,876 and the Nifty was up 75 points at 9,071.