Mumbai, Jan 15 (IANS): Expectations of an interest rate cut in the monetary policy over lower monthly inflation combined with a rebound in Asian markets gave a push to the Indian equity market on Tuesday.

Accordingly, the two key indices -- Sensex and Nifty50 -- closed over 1.30 per cent higher as healthy buying was seen in IT and other interest rate-sensitive stocks.

The surge came on the back of expectations that the Reserve Bank of India (RBI) could cut key lending rates following lower retail and wholesale inflation. The RBI's Monetary Policy Committee (MPC) is scheduled to meet on February 7.

On Monday, official data showed that lower fuel prices had eased India's retail inflation in December to 2.19 per cent, an 18-month low, from the annual rate of 2.33 per cent in November.

Consequently, the NSE Nifty50 gained 149.20 points or 1.39 per cent to settle at 10,886.80.

The BSE Sensex closed at 36,318.33 points, higher 464.77 points or 1.30 per cent from the previous close of 35,853.56.

It opened at 35,950.08 points and touched an intra-day high of 36,349.31 and a low of 35,950.08 points.

Interest-sensitive stocks -- banking, auto, capital goods and finance -- gained up to 0.76 per cent. IT counters led the gains among the 19 sectors on BSE.

Export-oriented IT stocks rose over 3 per cent as the rupee weakened to 71.07 per US dollar around 3.30 p.m, against the previous close of 70.93.

Stock-wise, Reliance Industries, Infosys and Yes Bank surged over 3 per cent, while Vedanta and Tata Consultancy Services gained in the range of 2 to 3 per cent.

In contrast, only 3 stocks out of the 30 on Sensex ended lower: Maruti Suzuki, ICICI Bank and Power Grid.