The stock market frenzy reached a fever pitch on Wednesday as key equity index S&P BSE Sensex crossed the 35,000 mark on the back of a rally in banking stocks.

Traders were upbeat on bank stocks, based on rumours in the market that the government would allow 100 per cent FDI in private banks and 49 per cent in public sector banks.

The Sensex has risen by 30 per cent in the last one year, without a correction, making it the highest such increase in nearly two decades. The index rose 310 points or 0.89 per cent to close at 35,081. The broader CNX Nifty index rose 0.82 per cent or 88 points to close at 10,788.

“We believe markets will continue to deliver new highs with more focus on sectors like defence, infrastructure, railways and core manufacturing ahead of the union Budget,” said Rakesh Tarway, Head of Research, Reliance Securities.

Wednesday’s rally was supported by heavy buying from foreign portfolio investors (FPIs) and domestic institutional investors (DIIs). FPIs net bought stocks worth ₹625 crore and DIIs were net buyers to the tune of ₹168 crore.

The government’s announcement that it was cutting additional borrowing requirement to ₹20,000 crore saw the 10-year bond yield plunge 17 basis points to 7.212 per cent compared to its previous close of 7.38 per cent. This too helped the banking stocks.

The Nifty Bank index gained 1.21 per cent or 314 points to close at 26,289, a record high. A news report by a local news channel, quoting unknown sources, which aired after the market closed, said the government could be looking at 100 per cent FDI in the banking sector.

Punjab National Bank’s shares gained 5.83 per cent, SBI was up 3.44 per cent and ICICI Bank rose 2.68 per cent.

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