By Manoj Dharra
MUMBAI (Reuters) - The BSE Sensex posted its biggest daily gain this month on Wednesday as banks advanced on hopes the Reserve Bank of India (RBI) would continue to inject liquidity, while Larsen & Toubro rose after the government extended interest subsidies for some exporters.
Energy shares such as Reliance Industries
Credit Analysis and Research Ltd (CARE)
Broader sentiment was also underpinned by strong recent buying by foreign institutional investors, who bought a net $719 million in domestic stocks on December 24, the biggest single-day inflow since October 5, bringing their total for the year to $24.05 billion.
"Even thought FIIs are on vacation there is a very high underlying demand. Flows so far have been positive," said Hitash Dang, vice president at Jaypee Capital.
"Every time there is a correction there are new entrants or there is again a buying opportunity," Dang added.
The benchmark BSE index rose 0.84 percent, or 162.37 points, to end at 19,417.46, its biggest percentage gain since November 30.
The broader NSE index rose 0.85 percent, or 49.85 points, to end at 5,905.60, also posting its biggest gain since November 30.
Banks rose after the central bank announced plans to buy 80 billion rupees of bonds via open market operations on December 28, marking the fourth consecutive weekly debt purchase.
The actions from the Reserve Bank of India brought some relief as advance tax outflows and an increase in government's cash balance with the RBI have temporarily exacerbated liquidity tightness in the banking sector.
Bharat Heavy Electricals
Reliance Industries rose 0.9 percent. The so-called Rangarajan committee has submitted its recommendations to the Prime Minister's Office this month, and media reports say one of the proposals include a new pricing formula for natural gas that could raise prices substantially.
CARE shares rose 23 percent from its IPO price of 750 rupees as investors who missed out on the IPO allocations bought the stock due to optimism about its outlook.
The carrier had on Monday submitted a revival plan to resume operations after having flying licence suspended in October.
Auto-maker Tata Motors Ltd
(Editing by Sunil Nair)