Markets on Monday surged to a one-month high with Sensex rising 128 points to 26,880.82 and Nifty jumping 36 points to reclaim 8,000 mark led by gains in pharma and banking shares on rising rate cut hopes and good earnings.
After taking a respite for a day, fag end short-coverings ahead of expiry of October contracts and firm European opening also helped domestic indices resume their north-bound journey, traders said. Continued fall in global crude oil price and renewed buying by foreign funds helped cement the rise.
The BSE 30-share barometer resumed strong in line with better Asian cues and remained in positive terrain. It moved in a narrow range till afternoon session, but a late round of buying pushed it higher to a more than one-month high of 26,880.82, logging a rise of 127.92 points or 0.48%.
On Monday, it had dropped by 98.15 points or 0.37%, snapping a strong five-day rally.
The 50-issue CNX Nifty of the NSE also bounced back 35.90 points, or 0.45%, to end above 8,000-mark at 8,027.60.
Some traders said markets are in a consolidation mode before making any fresh move on either side ahead of the US Fed's monetary policy review, which ends on Wednesday.
Shares of Ranbaxy, which is in the process of $ 4 billion merger with Sun Pharma, spurted over 6% after it scripted a turnaround in September quarter. This fuelled buying in Sun Pharma as well and it was the top gainer from Sensex pack with a rise of 4.31%.
"Markets rebounded...they were supported by Ranbaxy earnings and large cap bank stocks," said Rajshekar Gowda, Senior Analyst, HBJ Capital.
Besides, power, consumer durable and capital goods stocks also attracted good buying support. Interest rate sensitive shares rose on rising hopes of rate cut.
"Pressure is mounting on the Reserve Bank to cut rates at its December meeting...Jaitley's recent call to lower rates to encourage construction activity has revived expectations for rate cuts...," Singaporean brokerage DBS said in a note.