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Sensex crosses 20,000, bank stocks on fire

Sensex crosses 20,000, bank stocks on fire

Indian stock markets rose sharply in early trade, led by gains in banking stocks after the RBI cut a key rate yesterday.

The Sensex was up 194 points at 20,089.84 while Nifty rose 61 points at 5,967.

The index for banking stocks, Bank Nifty, rose over 3 percent. Among on the banking stocks, Yes Bank surged 7.2 percent while IndusInd Bank rose 6.6 percent. Other banking stocks that saw strong buying activity were Axis Bank, Kotak Mahindra Bank and ICICI Bank, each up over 3 percent.

Despite today's surge analysts remain cautious on the market ahead of the earnings season. Infosys kicks off the September earnings season when it announces its results this Friday. The Nifty is likely to see pressure near the 6000 levels, said Gaurang Shah, vice president at Geojit BNP Paribas Financial Services.

The Reserve Bank of India yesterday cut a key overnight interest rate, further dialling back an emergency measure it had imposed in mid-July in order to defend the embattled rupee that had tightened market liquidity and pushed up borrowing costs.

The move to cut the marginal standing facility (MSF) rate by 50 basis points to 9.0 percent was the latest by new Reserve Bank of India (RBI) Governor Raghuram Rajan to return monetary policy settings towards normal after a harrowing run for the rupee that saw it drop as much as 20 percent on the year as of late August.

Asian markets were mixed over the continuing deadlock in the US. On the Wall Street, the Dow Jones fell to near its month low yesterday.