State-run banks help Indian shares open at all-time highs

* Both NSE Nifty, BSE Sensex up 0.25%

* NSE Bank index hits record high

Dec 20 (Reuters) - Indian shares opened at record highs on Friday, driven by gains in state-run banks as investors cheered a central bank decision to conduct a special open market operation to bring down long-term yields.

The Reserve Bank of India on Thursday said it would buy 100 billion rupees ($1.4 billion) worth of the current benchmark 10-year bond while selling four bonds maturing in 2020 for an equivalent amount.

This is the first time the RBI has conducted a special open market operation of this kind, similar to the ‘Operation Twist’ carried out in the United States near the start of the decade.

The benchmark 10-year bond yield fell sharply to 6.61% by 0340 GMT from its previous close of 6.75%.

The NSE Nifty 50 Index rose 0.24% to 12,288.60 by 0355 GMT, while the S&P BSE Sensex index gained 0.25% to 41,781.50.

The Nifty PSU Bank index, which tracks the country’s state-run lenders, added nearly 2%. Shares of State Bank of India, the country’s largest lender, rose 1.8%.

The Nifty Bank index edged up 0.3% to an all-time high.

Meanwhile, shares in broader Asia hovered near 18-month highs as trade thinned in the run-up to Christmas.

Sentiment was also bolstered by Wall Street’s record gains on Thursday as U.S. Treasury Secretary Steven Mnuchin said an initial U.S.-China trade deal would be signed in early January.

In India, The Nifty IT index rose over 0.5%, with Tata Consultancy Services Ltd gaining nearly 1%.

The biggest laggard on the NSE index was miner Vedanta Ltd with a more than 1% drop. (Reporting by Chandini Monnappa in Bengaluru; Editing by Subhranshu Sahu)