By Abhishek Vishnoi
MUMBAI (Reuters) - The BSE Sensex and the Nifty rose more than 2 percent on Thursday as banking stocks saw their biggest single-day gains in over 4 years after the raised overseas borrowing limits for lenders in a slew of measures unveiled by new Reserve Bank of India (RBI) Governor Raghuram Rajan.
The NSE bank index surged 9.5 percent, marking its biggest single-day percentage gain since May 18, 2009, tracking a rally in the beleaguered rupee.
Rajan kicked-off his term with a bang on Wednesday, announcing measures to support the embattled rupee and unveiling a raft of steps to liberalise financial markets and the banking sector.
However, amid the euphoria over the new governor's energetic debut, investors warned he cannot by himself repair an economy mired by slowing growth and a record high current account deficit that has helped fuel a drop in the rupee of as much as 20 percent this year.
Analysts say the near-term direction continues to depend on a potential tapering of the Federal Reserve's bond-buying programme, a possible U.S. military strike on Syria and the Reserve Bank of India's policy review on September 20.
"So much rise on a new central bank governor is nice but the ground realities of elections, Fed taper, Syria would continue to dominate the market in the near term," said G. Chokkalingam, managing director and chief investment officer, Centrum Wealth Management.
The BSE Sensex rose 2.22 percent, or 412.21 points, to end at 18,979.76, marking its second consecutive day of gains.
The broader Nifty ended 2.66 percent, or 144.85 points, up at 5,592.95, after rising as much as 3.3 percent.
ICICI Bank rose 9.3 percent, while Axis Bank surged 15.7 percent.
Among state-owned banks, State Bank of India rose 9.6 percent, while Bank of Baroda ended 8 percent higher.
In midcap banks, Yes Bank surged 21.8 percent, while Kotak Mahindra Bank rose 8.8 percent.
Among non-banking finance companies, Housing Development Finance Corporation Ltd and LIC Housing Finance rose 5.8 percent each.
Among stocks that fell, IT shares slumped as the rupee jumped as much as 2.3 percent.
Profit-taking was seen in Tata Consultancy Services and Infosys after both stocks made their record highs on Wednesday.
TCS fell 3.8 percent, while Infosys lost 3.5 percent and HCL Technologies ended 1.9 percent lower.
(Editing by Subhranshu Sahu)