<div>The BSE Sensex rose around 2.5 per cent to new seven-month highs on 14 September after the government announced a hike in diesel prices and after the Federal Reserve announced a new asset purchase programme.</div><br /><br /><div>State-owned oil companies such as Bharat Petroleum Corp led the rally intitially after India raised the price of heavily subsidised diesel on 13 September to rein in its fiscal deficit. The shares later pared gains.</div><br /><br /><div>Lenders such as State Bank of India also rose on expectations the government's fiscal consolidation steps would increase chances of a rate cut from the RBI, which reviews policy next on 17 September.</div><br /><br /><div>India's wholesale price index (WPI) rose a higher-than-expected 7.55 per cent in August from a year earlier, mainly driven by higher food prices due to deficient monsoon, government data showed on 14 September.</div><br /><br /><div>Investors are also at the government's weekly cabinet meeting later in the day, which is expected to discuss opening up the aviation sector to foreign direct investment.</div><br /><br /><div>"Fuel price announcements coupled with positive global news flows will provide another boost to markets. This rally should continue in near term," Jagannadham Thunuguntla, Head of research at SMC Investments and Advisors Limited.</div><br /><br /><div>The Sensex rose 2.5 per cent as of 2:37 p.m. and headed for its eighth consecutive winning session. The Nifty rose 2.5 per cent as well.</div><br /><br /><div>Lenders gained on expectations the fuel price hike would increase the prospect of rate cuts, given Reserve Bank of India officials were seen as wanting the government to shore up its finances before considering easing monetary policy.</div><br /><br /><div>State Bank of India rose 5.4 per cent, while ICICI Bank rose 5.3 per cent.</div><br /><br /><div>Shares in software services exporters and metals rose after the Fed launched an aggressive stimulus program, saying it would pump $40 billion into the US economy each month until it saw a sustained upturn in the weak jobs market.</div><br /><br /><div>Tata Steel rose 4.5 per cent, while Hindalco Industries rose 7.7 per cent, while Infosys rose 2.6 per cent.</div><br /><br /><div>Airlines rose on hopes that the sector would benefit from a potential opening up of the sector. SpiceJet extended gains for a third day, up 5.8 per cent.</div><br /><br /><div>(Reuters)</div>