Indian shares rose on Tuesday to their highest close in more than a month, with drugmakers getting a boost after Ranbaxy Laboratories Ltd reported its first profit in six quarters.

Banks also extended recent gains on rising expectations the Reserve Bank of India would cut rates earlier than expected next year. State Bank of India rose 2.4 per cent, while ICICI Bank Ltd ended 1.8 per cent higher.

Ranbaxy surged 6.11 per cent, while Sun Pharmaceutical Industries, which is in the process of acquiring it, rose 4.31 per cent.

The benchmark BSE index rose 0.48 per cent, while the broader NSE index gained 0.45 per cent, with both marking their highest close since September 22.

The Sensex rose 128 points or 0.48 per cent at 26,880.82 while the NSE Nifty was up 36 points or 0.45 per cent at 8,028.

The 30-share barometer had lost 98.15 points in the previous session.

Top Sensex gainers: Sun Pharma (4.64%), Cipla (3.31%), SBI (2.67%), Tata Power (2.6%) and GAIL (1.96%).

Among the BSE sectoral indices, Health Care, Bankex, Consumer Durables and Capital Goods were the top gainers.

Nifty gainers

Bank Nifty surged to a fresh all-time high today. Provisionally it was up 0.67 per cent at 16,667.

Cipla and Amara Raja Batteries were among the Nifty stocks that touched their 52-week highs today.

Cipla hit a new one-year peak of Rs 648.80. It ended at Rs 648, up 3.17 per cent against its previous close of Rs 628.10.

Amara Raja Batteries shares hit a 52-week high of Rs 679.90 on the NSE today. It finished at Rs 661, up 5.37 per cent over its previous close of Rs 627.30.

Brokers said sentiments turned better as funds and retail investors made fresh buying, tracking a mixed trend on other Asian markets ahead of the US Federal Reserve’s monetary policy meet.

Besides, expectations of encouraging earnings from more companies also supported the recovery, they said.

Jubilant Foodworks fell 2.2 per cent ahead of earnings. The company will announce Q2 results on Thursday. Traders worry July-Sept same store sales might be weak given increasing competition.

Global markets

World stocks inched up and US bond yields steadied after almost three weeks of gains on Tuesday with Federal Reserve policy setters expected to end six years of aggressive monetary stimulus.

The Fed kicks off a two-day meeting later with markets betting on an announcement that it will stop its post-financial crisis high-intensity asset buying and reinforce that a softly-softly approach will be taken to raising rates.

With the Euro Zone running into turbulence again and China's giant economy also struggling for pace, the prospect of a world without US stimulus has troubled markets over the last couple of months, but they finally seem to be getting used to the idea.

European shares rose for the fourth time in six days, helped by better-than-expected results from pharmaceutical group Novartis and Swiss bank UBS, while the dollar, commodity markets and US bond yields steadied.

"I think in the last few days we have had a reality check," fund management group Hermes' chief economist, Neil Williams, said. "The world is certainly not a happy place at the moment but it hasn't got that much worse in recent weeks." "I'm expecting the Fed to re-assert its dovishness, they haven't come this far including six years of QE (quantitative easing) to end it abruptly and leap towards a rate hike."

London's FTSE, Germany's DAX and France's CAC were up 0.5, 1.2 and 0.4 per cent respectively and the euro, the pound and benchmark German government bonds all traded around recent levels.

Gold also recovered its footing after falling to its lowest in nearly two weeks, while emerging market stocks , which are also seen as vulnerable from reduced US and global stimulus, rose 0.7 per cent as hopes of more reforms of state-owned business saw Chinese stocks jump 2 per cent.

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