India's broader NSE index gained 1.1 percent on Thursday as lenders rallied on hopes their coffers would swell with people starting to exchange higher-denomination notes after the government removed the old ones from circulation. Sentiment also got a boost as global shares recovered from Wednesday's steep falls in the aftermath of Donald Trump's election as US president. The broader NSE index closed up 1.11 percent at 8,525.75, while the benchmark BSE index closed 0.97 percent higher at 27,517.68.
The Nifty bank index rose as much as 3.92 percent to its highest in two months. Banks' are expected see improved liquidity when people start tendering cash after the government decided to withdraw 500 and 1,000 rupee notes. Financial stocks were among the biggest percentage gainers on the NSE index, as investors welcomed the government's decision to withdraw higher denomination banknotes.
State Bank of India surged as much as 8.75 percent. Banks while ICICI Bank Ltd rose 6 percent. Market sentiment also got a boost after global investors turned hopeful about generous tax cuts and higher infrastructure and defence spending in the US following Donald Trump's victory. The S&P 500 index rose 1.11 percent, sparking gains across Asia. The MSCI's broadest index of Asia-Pacific shares outside Japan bounced 1.8 percent after slumping 2.4 percent on Wednesday. "Markets over-reacted yesterday to Trump's win, and in anticipation that Trump is going to be elected, more people had gone short on the market," said R.K. Gupta, managing director, Taurus Asset Management.