MUMBAI: The Sensex logged its biggest single-day gain on Friday in more than a month led by banking stocks on recapitalisation hopes even as worries over corporate earnings receded. Sentiment was further bolstered on reports that state-run Employees’ Provident Fund Organisation (EPFO) would start investing in equity markets from next week. Traders constructed long positions in select interest rate-sensitive counters such as banking and automobile stocks ahead of the Reserve Bank of India’s monetary policy meeting on August 4. Investors further drew comfort from the fact that foreign institutional investors (FIIs) have started buying stocks in July after being sellers in May and June. The Sensex gained 409 points, or 1.48%, on Friday to close at 28,114. The Nifty advanced 111 points, or 1.32%, to end at 8,532. The index to measure index volatility, India VIX, dropped 4.9% to 14.57, indicating a sense of calm among the market participants. Domestic institutional investors (DIIs) turned major buyers on Friday, buying shares worth Rs 1,021 crore, though FIIs remained sellers of equity worth Rs 277 crore. “We expect Indian equities to give returns of about 10-12% through the end of this fiscal year,” said Bharat Iyer, managing director, global equity research at JP Morgan India. “We would not be surprised to see returns in the region of 15-20% for the next two or three years. So, it’s a good time to buy stocks.” “Better-than-expected quarterly earnings from select companies and increased expectations that RBI will cut rates improved market sentiment,” said Dipen Shah, head of private client group research at Kotak Securities.