Sensex surges 451 points on U.S. Fed, China hopes

By Abhishek Vishnoi

MUMBAI (Reuters) - The Sensex and the Nifty rose more than 2 percent on Monday, to mark their biggest single-day gain in a month, tracking gains in other Asian markets, cheered by the prospect of extended stimulus in the United States and real economic reform in China.

World shares hit a near six-year high on Monday, boosted by signs of ambitious economic reform in China and after Janet Yellen, expected to be the next Federal Reserve chief, sounded in no rush to scale back stimulus.

Traders say liquidity would keep sceptics and economic worries aside for the time being. UBS downgraded India to "neutral" while upgrading China to "overweight", saying Plenum reforms will likely cause China to outperform Asia ex-Japan.

Overseas institutional investors are heading towards their third straight month of buying in Indian cash shares, totalling more than $5 billion since August, exchange and regulatory data shows.

"Earnings season had been more of good than bad. We are looking to accumulate good stocks at lower levels as liquidity and global sentiment remains good," said Vivek Mahajan, head of research at Aditya Birla Money.

The Sensex rose 2.21 percent, or 451.32 points, to end at 20,850.74, marking its biggest single-day gain since October 18.

The Nifty rose 2.19 percent, or 132.85 points, to end at 6,189, closing within 11 points of psychologically important 6,200 level.

Among blue-chip shares, Larsen and Toubro (NSI:LT.NS - News) rose 4.1 percent while Reliance Industries (NSI:RELIANCE.NS - News) ended 2.7 percent higher, on improving global risk appetite.

Shares in cigarette maker ITC (NSI:ITC.NS - News) surged 3.7 percent on unwinding of short positions in its November futures contracts, dealers said.

Bank stocks gained with bond yields on watch ahead of the Reserve Bank of India's 80 billion rupees bond purchases later in the day.

HDFC Bank (NSI:HDFCBANK.NS - News) rose 4.1 percent while ICICI Bank (NSI:ICICIBANK.NS - News) gained 2.1 percent.

Among state-owned banks, State Bank of India e 2.6 percent while Bank of India (NSI:BANKINDIA.NS - News) surged 7.9 percent.

Tata Steel (NSI:TATASTEEL.NS - News) shares rose 3.1 percent, adding to Thursday's 4.9 percent gain after the company's second-quarter profit beat expectations, helped by a rise in prices and market share at home.

However, among stocks that fell, Coal India (NSI:COALINDIA.NS - News) shares fell 1.4 percent, adding to Thursday's 3.7 percent fall after its September quarter profit fell marginally to 30.52 billion rupees, lagging some analysts expectations.

(Editing by Sunil Nair)