Sensex rises over 1 percent, posts first weekly gain in four

MUMBAI (Reuters) - The BSE Sensex and Nifty rose on Wednesday, posting their first weekly gain in four and the biggest since Jan. 23 week, as lenders rallied ahead of the Reserve Bank of India's policy review, while Sun Pharmaceutical Industries(SUN.NS) and Ranbaxy Laboratories(RANB.NS) surged ahead of a planned merger.

Sentiment was also bolstered by firmer European shares on the back of data showing manufacturing activity across the euro zone accelerated faster than previously thought.

The Nifty rose 1.1 percent to post a weekly gain of 2.9 percent, its best since the week ended on Jan. 23.

The BSE Sensex gained 1.08 percent to 28,260.14, adding 2.9 percent in the week.

Markets are closed on Thursday and Friday for holidays.

Banking stocks rose with the Bank Nifty adding 2.3 percent ahead of the Reserve Bank of India's policy review on April 7. The central bank is expected to keep interest rates on hold although markets are bracing for a potential surprise rate cut.

Sun Pharmaceutical surged 5.6 percent, while Ranbaxy Laboratories rose 5.6 percent.

Trading in Ranbaxy shares will be suspended from Monday ahead of its merger with Sun Pharmaceutical.

(Reporting by Indulal PM; Editing by Subhranshu Sahu)