Equity benchmarks jumped to three-week highs in early trade on Tuesday, as rate hikes fears were soothed after the RBI said inflation looked set to ease and as risk sentiment improved globally on Britain's fiscal policy U-turn.
The NSE Nifty 50 index rose 1.02 per cent to 17,488.25, while the S&P BSE Sensex advanced 1.04 per cent to 59,016.61 in early trade, set to add to two straight sessions of gains.
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 of 7.41 per cent hit in September, while economic activity is poised to expand.
In broader Asia, equities rose as the dramatic U-turn in British fiscal policy brightened investor sentiment, while the US dollar took a breather at its lowest levels in more than a week.
In domestic trading, Nifty's automobile, IT , energy and public sector bank indexes climbed more than 1% each.
Inflow of funds from domestic investors in equities were strong even as foreign institutional investors sold shares.
Foreign investors sold a net of ₹372 crore worth of equities on Monday, while domestic investors bought ₹1,582 crore worth of shares, the National Stock Exchange's provisional data showed.