Singh, who has served as finance minister and central bank governor in the past, will take over finance from Palaniappan Chidambaram, who becomes home minister following the resignation of Shivraj Patil.
"I think RBI will have a greater role now. Finance ministry's interference will be less as PM's hands are full. It will be more of a professional approach than a political approach," said R.K.
Gupta, managing director of Taurus Mutual Fund in New Delhi.
"PM is more keen on growth than inflation. For supporting growth, a rate cut is likely," he said.
Most banking stocks rose expectations the central bank would soon cut interest rates to shore up confidence and growth.
Sector leader State Bank of India rose 2.3 percent to 1,112 rupees and HDFC Bank rose 4 percent to 957.00 rupees, but ICICI Bank was down 1.45 percent
Reliance Industries, India's most valuable listed firm, contributed most to the gains. It was up 2.3 percent at 1,157.60 rupees.
At 11.26 a.m., the 30-share BSE index was up 1.99 percent at 9,273.48 points, with 26 components gaining, having risen as much as 2.6 percent in morning deals.
In the broader market 1,220 gainers outpaced 625 losers on modest volume of 68 million shares.
Leading passenger car marker Maruti Suzuki was down 3 percent at 517 rupees after its November vehicle sales fell 24.4 percent from a year earlier.
Other automakers also fell on a weak outlook for the sector, with Mahindra & Mahindra down 4.2 percent at 269.70 rupees.
The 50-share NSE index was up 2.24 percent at 2,816.80 points.
STOCKS ON THE MOVE
* Electronic communications systems maker Astra Microwave rose 8.7 percent to 44.50 rupees after it received orders worth 570 million rupees from Israel's ELTA Systems.
* India Infoline Ltd rose 4.2 percent to 37.40 rupees after its board approved buyback of equity shares at 43.20 rupees per share.
MAIN TOP 3 BY VOLUME
* Unitech on 7.2 million shares
* ITC on 5.1 million shares
* GVK Power & Infrastructure on 3.6 million shares
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