Mumbai, Nov. 26: The BSE sensex climbed 3.8 per cent on Wednesday in a late rally led by financials as rate cut expectations gathered momentum after China lowered its interest rates.

In a highly volatile trade, the sensex opened at 8768.20, marginally lower than its previous close of 8695.53. It later ended at 9026.72, a rise of 331.19 points or 3.81 per cent.

China slashed interest rates on Wednesday for the fourth time since mid-September, dramatically stepping up the pace of monetary easing to cushion the blow of global financial turmoil on the world’s fourth-largest economy.

The People’s Bank of China cut benchmark rates for one-year loans and deposits by 1.08 percentage points, lowering the cost of one-year borrowing to 5.58 per cent and the rate on 12-month certificates of deposit to 2.52 per cent. It also reduced banks reserve requirements by 100 basis points and one year lending rate.

With inflation in India showing a consistent decline and expectations that the trend will be maintained when figures are out on Thursday, investors used the opportunity to buy banking shares.

ICICI Bank, India’s second-largest lender, rose 9.6 per cent to Rs 350.50, while HDFC Bank firmed up 8.6 per cent to Rs 907.20. Leading lender State Bank of India gained 3 per cent to Rs 1,104.25.

The BSE Bankex was the largest percentage gainer, rising by 5.96 per cent.

Sterlite Industries rose around 13 per cent, topping the list of gainers, and pulling the metal index up by 3.66 per cent. This was on account of expectations that the rate cut in China will improve global metal demand.

EU package

The European Commission on Wednesday approved a package aimed at giving the sagging European economy a sharp, temporary boost with a 200-billion-euro ($260 billion) spending plan across the 27-nation bloc, an EU source said.

The plan, higher than initially thought, calls for a targeted and temporary fiscal stimulus of 1.5 per cent of EU gross domestic product. National measures would account for around 170 billion euros, or 1.2 per cent of GDP, and EU and European Investment Bank budgets around 30 billion euros.