Benchmark indices rallied to a 28-month high and the Bank Nifty shot up to a 30-month high in Wednesday's trade after RBI governor said that he has noted the fall in inflation, fuelling hopes for a further rate cut in the upcoming Policy.
At the close, the Sensex was up 491 points or 2.5% at 20,213 and the Nifty gained 151 points or 2.5% at 6,147.
In the broader markets, the midcap index gained 1.6% and the smallcap index added nearly 1%, both underperforming the Sensex which was up 2.5%
The RBI’s shift in stance came in after the Wholesale Price Index inflation for April 2013 moderated for the third straight month to 4.89%, below the comfort zone of the RBI, bolstering hopes of an interest rate cut by the central bank. RBI’s comfort level for inflation is between 4% and 5%.
Meanwhile in global markets, Europe was trading largely in the green with CAC and DAX up 0.2% while FTSE was flat with a negative bias.
In Asia, Japan's Nikkei average rose 2.3%, breaking above 15,000 for the first time since January 2008.
The other major gainers were Shanghai Composite, Hang Seng and Taiwan Weighted gaining 0.3-0.8%.
Back home, all the sectoral indices registered over 1% gain except the IT index, which was up 0.4%.
Rate sensitive like Realty, Bankex and Auto indices surged 2-4% along with Capital Goods, PSU, Oil & Gas, Health Care, Metal, Power, FMCG and Consumer Durables indices which moved up 1.5-3%.
Wipro down 0.5% was the only stock to close in the red, among Sensex-30.
The major movers among the Sensex stocks were from the financial space with HDFC, SBI, ICICI Bank and HDFC Bank adding nearly 4-5%.
All the major auto names - Mahindra & Mahindra, Tata Motors, Bajaj Auto, Maruti Suzuki and Hero MotoCorp- gained 2-3.6%.
Oil & Gas majors, Relaince Industries and ONGC closed up 2.6% each.
Metal stocks like Hindalco, Jindal Steel and Tata Steel added 1.5-2.7%.
L&T, Cipla, NTPC, ITC and Dr Reddys Lab, up 2-4% were the other notable gainers.
The market breadth was strong on the BSE. 1466 stocks advanced while 973 stocks declined.