By Manoj Dharra
MUMBAI (Reuters) - The BSE Sensex posted on Tuesday its biggest daily percentage gains this year on growing hopes the Reserve Bank of India (RBI) will cut interest rates later this month, which boosted rate-sensitive stocks such as ICICI Bank and Tata Motors.
The gains were in line with global shares that rebounded sharply, reclaiming most of the previous day's steep losses, as investors bet major central banks would decide to keep monetary policy loose at meetings this week.
However, India's record-high current account deficit remains a key worry as it is increasing the dependence on foreign investments, the government's top economic adviser said on Tuesday, making the country vulnerable to a sudden stop and reversal in fund inflows.
"Buying from FIIs continued on Tuesday while partially it was short covering as it was an oversold market, but volatility levels suggest there is still caution," said Deven Choksey, managing director, KR Choksey Securities.
The benchmark BSE Sensex rose 1.4 percent, or 265.21 points, to end at 19,143.17, posting their biggest single daily gains since November 29.
Gains come a day after indices end near the lowest close since November 27, hit on Thursday.
The broader Nifty rose 1.5 percent, or 85.75 points, to end at 5,784.25.
The RBI's policy will decide the momentum for the market even as the finance minister continues to assure on growth, Choksey added.
Among rate-sensitive shares that gained, ICICI Bank Ltd
Credit Suisse said in a report that India has joined "the Cheapest-4 club" as of Tuesday, meaning it is among the four most inexpensive markets in the Asia ex-Japan region. The report highlighted Tata Motors Ltd
Shares in Dr Reddy's Laboratories
Export-driven stocks, such as technology and pharma companies, gained tracking weakness in rupee. Tata Consultancy Services
Shares in Zee Entertainment Enterprises Ltd
J.P. Morgan Securities lowered its rating on India's Bajaj Auto Ltd
Shares in Bajaj Auto fell 0.79 percent.
(Additional reporting by Abhishek Vishnoi; Editing by Jijo Jacob)