Benchmark indices surged in trade, led by a solid rally in banking names like State Bank of India, ICICI Bank and Axis Bank.
Global cues remained robust with most Asian markets closing substantially higher, while European markets were seeing solid gains.
The Sensex ended the day higher by a huge 463 points, while the Nifty gained 146 points in trade. Apart from the frontline banking names, metal stocks also participated in today's rally. Hindalco and Vedanta both gained 5 per cent each.
IDBI Bank surged after the company said that it can double its business and can also reduce its non performing loans. The stock was up 6 per cent in trade. Most banking shares were higher after the reserve Bank of India allowed lenders to expand capital base to meet Basel III norms.
Mid cap stocks also saw good buying support led by gains in Dewan Housing Finance, Bank of India and Union Bank of India.
IT stocks also saw good buying support led by gains in Infosys.
Meanwhile, markets across Asia saw a big surge in trade, with the Japanese Nikkei gaining 4 per cent. Europe was trading with gains with most of the indices up 1%.