MUMBAI, April 29: Even as the Reserve Bank of India tightened cash conditions and kept all other rates unchanged, Dalal Street rallied 2.1 per cent on Tuesday to their highest close in two months, led by gains in Reliance Industries, banks and software stocks.

The BSE Sensex ended up 363 points, at 17,378.46, its highest close since February 29. The benchmark, which is down 14.3 per cent in 2008, had slipped into negative territory ahead of the monetary policy that was released at noon. State Bank of India (SBI) gained 3.3 per cent to Rs 1,793.50, while HDFC Bank ended nearly 2 per cent higher at Rs 1,547.50, as the RBI’s rate decision calmed worries about loan growth. The bank sector index added 1.7 per cent.

The government and the regulators unveiled a series of measures on Tuesday to tame inflation and secure food supplies, including the central bank’s second move this month to drain liquidity from the banking system. “People were expecting some increase in the repo and reverse report rate. That has not happened and it has come as a positive surprise for the market,” said a dealer. Software shares climbed after the government extended a tax holiday scheme by a year. Infosys Technologies rose 5.2 per cent. Other Software shares followed suit.

Brokers said the central bank’s economic growth forecast of 8 per cent to 8.5 per cent in the fiscal year that began this month was also positive for the stock market. The market trend in the near term will be influenced by the US Federal Reserve’s decision on Wednesday, when the US central bank may cut interest rates by 25 basis points.