Banking stocks surged following the announcement of a quantitative easing programme in the US. ICICI Bank led the rally with a surge in its stock price by more than 4%. Other banking stocks that gained were SBI (3.63%), Axis Bank (3.5%) and Bank of Baroda (3.165).

Metal stocks were in the limelight with Tata Steel gaining 5%, Hindalco gaining 5.5%, Jindal Steel rising 5% and Sterlite jumping 2.55%.

Shares of Reliance Industries gained 1.61% in early trade. Interestingly, there was not a single loser amongst the Nifty stocks.

Today's rally was largely driven by a diesel price hike, which according to marketmen would go a long way in fiscal consolidation and in signalling the government's intent to take the reform process forward.

A third round of quantitative easing programme in the US announced by Federal Reserve Chairman Ben Bernanke was one of the prime drivers of the market today, as the new measures would unleash a wave of liquidity across global markets.

Markets are expected to take cues from the inflation data which is slated later today. A reading of higher than 7% in all probability would prevent the Reserve Bank of India in cutting rates when it meets for the Monetary Policy Review on September 16, 2012.

Meanwhile, Asian markets all rallied gaining between 1-2%.

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