Bankex—the banking sector index of the Bombay Stock Exchange (BSE), rode high on global sentiments, rising 4.84% to 8691.45 on Wednesday.

The Bankex, outperformed the benchmark Sensex, which rose 4.17%, clocking its largest single-day gain to close at 16,322.75.

Banks stocks rose on expectations that the Reserve Bank of India (RBI) would take a cue from the US Fed and cut interest rates in the forthcoming credit policy review in October.

The stocks of HDFC Bank Ltd gained 7.83% to close at Rs1,326.30 and Bank of Baroda’s were up 7.32% at Rs317.60. The two lenders were the largest gainers among banks.

The US Federal Reserve cut its benchmark lending rate by half a percentage point to 4.75% on Tuesday. The rate cut, the first since 2004, gave a shot in the arm to financial markets embroiled in a subprime mortgage crisis.

Six banking sector stocks— State Bank of India (Rs1,770), HDFC Bank Ltd (Rs1,326.3), Axis Bank (Rs6,84.85), Kotak Mahindra Bank (Rs837.6) Karnataka Bank Ltd (Rs220.05), and UCO Bank (Rs41.10)—touched their lifetime highs on Wednesday, buoyed by the good global sentiment.

According to analysts tracking the banking sector in India, Indian investors are expecting RBI to take into consideration the fact that there has been a slowdown in credit growth and that inflation is well under control.

“Price stability and well-anchored inflation expectations" have been mentioned as thetwo primary objectives of RBI by governor Y.V. Reddy, during the announcement of the annual credit policy.

Sarika Lohra, banking analyst at Angel Broking Ltd, says although RBI “may adopt a wait-and-watch policy" before it announces an interest rate cut, market players are expecting that there will, at least, be no further tightening.

Vibha Batra, co-head, financial sector rating, at Icra Ltd, said bank stocks zoomed on Wednesday, encouraged by future capital raising prospects.

The BSE real estate index on Wednesday moved up 5.77%, from 8,188.73 to 8,491.49 points, and emerged the top gainer among all sectoral indices. The top gainer among the realty stocks on Wednesday was New Delhi-based DLF Ltd, which gained 8.76% to close at Rs713.25 a share. The other stocks that rallied were Mumbai-based Indiabulls Real Estate Ltd and Bangalore-based Puravankara Projects Ltd, which gained 5.75% to close at Rs415 a share. Shares of Indiabulls rose 6.77% to close at Rs524.50 a share.

The oil and gas sector was also a high gainer, moving up by 5% to close at 8924.13 points. This despite oil prices touching an Asian high of $82 (Rs3,305) a barrel in the day’s trade. The top gainer among the oil stocks was GAIL India Ltd, which went up by 6.3% to close at Rs344.80 a share, while Oil and Natural Gas Corp. Ltd went up by 5.95% to close at Rs901.50 per share. Reliance Industries Ltd (RIL), the stock with the largest weightage on the Sensex, went up by 5.56% to close at Rs2,172.90 a share.

RIL also touched a market capitalization of Rs3 trillion for the first time during the day’s trade, a spokesperson for the company said.

The oil price hike impacted the stocks of oil marketing companies, with Bharat Petroleum Corp. Ltd losing marginally to close at Rs310.55 a share—down 0.06%, while Hindustan Petroleum Corp. Ltd rose marginally by 0.19%, to close at Rs240.05 a share.

Analysts pointed out that the sector has been underperforming the index for the past six months and that it was time for it to pick up.

“Much of the stock movement today was based on sentiment," said Shriram Iyer, head of research at Edelweiss Securities Ltd. “Logically speaking, with the rupee appreciating and oil prices going up, companies like Reliance Industries, which are large exporters, should see a downside, but instead the stock went up."

Rohit Nagraj, senior analyst at Angel Broking Ltd, said: “The sector has been depressed for throughout the 1800 point rally except for Reliance Industries."