Sensex, Nifty up 1%; govt sets inflation target at 4% till 2021

Moneycontrol Bureau12:59 pm Market Update: The Sensex gained 261.51 points or 0.94 percent at 27975.88 and the Nifty rose 97.60 points or 1.14 percent to 8648.70.More than two shares advanced for every share falling on the BSE.12:45 pm Europe opens: European stocks opened higher after the Bank of England (BoE) unleashed a fresh stimulus package, but some caution remains ahead of US jobs numbers later in the day.

The pan-European STOXX 600 was up 0.18 percent at the open.12:35 pm RBI policy poll: Outgoing Reserve Bank of India Governor Raghuram Rajan is likely keep interest rates on hold on Tuesday, leaving it to his successor to decide if inflation is subsiding enough after the monsoon season to make another cut, according to a Reuters poll.

All but five of the 43 economists polled this week said the RBI would leave rates unchanged at 6.50 percent at Rajan's last policy review before he steps down on September 4.

The other five economists expected a 25-basis-point cut.

The RBI was likely to leave the cash reserve ratio unchanged at 4.00 percent, according to the poll.

Expectations were running high, however, for a 25 basis point cut in the repo rate to 6.25 percent in the final three months of this year, with the RBI holding steady thereafter until at least the end of 2017.12:20 pm FII View: Laurence Balanco of CLSA says the Nifty continues to hesitate at resistance provided by the upper boundary of the newly formed uptrend channel which coincides with the July/October 2015 highs.He further says, there are short-term signs of slowing momentum which at some point should lead to a correction back to the 50-DMA and lower boundary of the uptrend channel, currently at 8,238-8,330. Such a move should be seen as a buying opportunity, he feels.Also read - All imports will soon be looking at anti-dumping duty: Steel Secy12:00 pm Market Check

Equity benchmarks as well as broader markets remained strong in noon trade, rising 1 percent each on broadbased buying after a consolidation for previous five sessions.

The 30-share BSE Sensex gained 279.54 points at 27993.91 and the 50-share NSE Nifty surged 92.45 points to 8643.55. About 1675 shares advanced against 720 declining shares on the BSE.

Finance ministry official said the government has kept inflation target at 4 percent for next five years (with +/- 2 percent).Sajjid Chinoy of JP Morgan says India won't be in a situation where CPI will be elevated for years at around 7-8 percent, adding there is no space to cut interest rates in near-term.