The rally on Indian bourses was also fuelled by favourable provisions on GAAR for P Note holders. The Sensex closed up by 439 points, while the Nifty up 129 points.
In Europe leaders agreed to allow banks to be re-capitalised directly by the currency area's rescue fund.
The news boosted market sentiments across the globe, including Asia and Europe. Hong Kong's Hang Sang, Taiwan Weighted, Singapore's Strait Times, Japanese Nikkei and Korea's Kospi closed significantly higher.
In Europe, the French CAC and the German DAX were all trading higher by more than 2% at 3.15 pm IST.
On the domestic bourses the metals pack saw frenzied buying with Hindalco, Sterlite and Tata Steel rallying sharply. Almost all of the Nifty stocks ended in the green. Sentiments were also improved after Morgan Stanley maintained "equal weight" on India.
Markets are expected to see a bullish trend going forward on renewed optimism that Manmohan Singh who has now taken charge of the Finance portfolio would carry the reform process forward. There are already signs that things are moving in that direction.