New Delhi  - Indian stocks rose nearly 4 per cent Tuesday after the Reserve Bank of India lowered its inflation forecast.

The 30-share Sensex index of the Bombay Stock Exchange gained 329.73 points, or 3.8 per cent, to close at 9,004.08. All sectors of the benchmark index ended with gains.

The broader 50-share Nifty of the National Stock Exchange also was up 92.8 points, or 3.46 per cent, at 2,771.35.

Market analysts told the PTI news agency that trading sentiment was buoyed after the central bank predicted that inflation would ease to below 3 per cent by the end of India's financial year on March 31.

Although the central bank kept its key interest rates unchanged Tuesday, its projection of lower inflation boosted optimism that interest rates would be cut to encourage growth, spurring buying in banking sector stocks.

Encouraging third-quarter earnings by the country's top lenders, the State Bank of India and ICICI Bank, also influenced trading, the report said.

However, the central bank predicted lower growth for the Indian economy because of the deepening global economic downturn. The bank reduced its growth estimate for this fiscal year to 7 per cent from an earlier projection of 7.5 to 8 per cent. (dpa)