BSE Sensex snaps 7-day slide, rises 5.5 pct

By Prashant Mehra

MUMBAI (Reuters) – The BSE Sensex snapped a seven-day slide and climbed 5.5 percent on Friday, after large domestic funds bought in late trade triggering short covering ahead of the weekend.

Expectations the Reserve Bank will cut interest rates to support slowing growth underpinned the market that had tumbled a fifth over the previous seven days.

Traders said the fund buying came in during the last 90 minutes after the main index slipped into negative. Index heavyweight Reliance Industries Ltd, financials and outsourcers led the bounce.

"People have been expecting a rate cut in the next couple of days and that is visible in the gains made by SBI and HDFC. If it doesn't come, there may be renewed selling in banking stocks," said Neeraj Dewan, director at Quantum Securities.

State Bank of India, the country's largest lender, rose 8.3 percent to 1,183.15 rupees, while rival ICICI Bank gained 4.7 percent to 335.55 rupees. Mortgage lender Housing Development Finance Corp rose 8.5 percent to 1,399.30 rupees.

The bank sector index rose 4.6 percent.

The Reserve Bank has cut its main lending rate by 150 basis points to 7.5 percent and banks' cash reserve requirement by 350 basis points to 5.5 percent in the past two months and the authorities have said more steps were on the anvil.

The 30-share BSE index rose 5.49 percent, or 464.20 points, to 8,915.21, its first gain in eight sessions.