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The key benchmark indices ended at record closing highs, bolstered by strength on the banking counters.
The 30-share Sensex galloped by 370 points or 1.6% at 22,714 points and the 50-share Nifty raced ahead by 101 points at 6,796.
All the sectoral indices ended in the green, with IT being the sole exception.
The Bank Nifty jumped by a whopping 3.45% at 12,937 points.
The broader markets outperformed the benchmark indices, with the BSE midcap index strengthening by 1.6% at 7285 and small-cap index adding 2% at Rs 7427.
The strength witnessed across the Asian and European Streets would have triggered a rebound after a sluggish start to the day's proceedings.
The European indices, including the CAC, DAX and FTSE, jumped more than a per cent each in mid-session trades.
On the Asian front, all the indices ended in the green, with the exception of Nikkei index.
The Japanese stocks stumbled 2.1% to a three-week low after the Bank of Japan Governor Haruhiko Kuroda raised doubts over whether the central bank will ease its policy stance anytime in the near future, which in turn catapulted the yen higher.
Overnight, the US stocks had snapped their three-day losing streak; the S&P 500 was up 0.38%, Nasdaq Composite was up 0.81% and Dow Jones Industrial ended up 0.06%.
Earlier in the day, the share prices on the BSE had stopped updating for about 15-20 minutes, marking the second consecutive session in which trading has been disrupted on Dalal Street on account of a technical glitch.
In economy-related developments, a news report by the International Monetary Fund had said that India’s economy is on its way to faster growth. In its latest report, IMF predicts that the Indian economy will expand 5.4% in 2014-15 and accelerate to a pace of 6.4% the following year.
On the space to watch out for, the FOMC meeting minutes will be released on Wednesday evening. These are the meeting minutes of Yellen's first decision, in which a third taper of QE to $55 billion was announced and forward guidance was dropped.
The markets will look for indications regarding the timing of a possible rate hike.
Sun Pharma, Tata Motors and private banks contributed the most to the Sensex's jump.
Sun Pharma soared by 6.9% to Rs 627.80 to lead the gainers charts on the BSE. Sun Pharma on Monday had announced that it will acquire 100% of Ranbaxy Laboratories in a $4 billion all-share transaction.
Moreover, the brokerage UBS raised the rating on these stocks to ‘Buy’ after the acquisition deal. Ranbaxy gained 4.9% at Rs 497 as a result.
Hindalco climbed sharply by 4% to Rs 142 on the BSE after Alcoa Inc reported quarterly earnings that beat analysts' expectations on April 8. Index heavyweight RIL gained 1.3% at Rs 961.
A week after agreeing to temporarily supply gas to fertiliser companies, RIL has shot off a letter to them saying it is not bound by any agreement to supply gas from its KG-D6 at $4.2/mmbtu even in the interim.
In the banking space, Axis Bank gained 4.4% at Rs 1484, ICICI Bank gained 4.1% at Rs 1259 and SBI added 3.2% at Rs 1984. And in the mid-cap banking space, Bank of Baroda, South Indian Bank, Indian Bank and Oriental Bank of Commerce rallied more than 5% each, while Federal Bank, IDBI Bank, Punjab National Bank, Canara Bank, Bank of India, Jammu and Kashmir Bank, Union Bank of India and Syndicate Bank are up nearly 4% each.
Most analysts have upgraded the banking sector to Neutral from negative on signs of an economic turnaround.
Among other stocks, OnMobile Global surged 6.6% to Rs 36.35 on the BSE after the company executed a non-binding memorandum of understanding for the potential divestment of its group company, Voxmobili SA.
Gulf Oil Corporation surged 5.9% to Rs 122, extending its 6% rally in past two trading sessions after the company said its promoter, Gulf Oil International (Mauritius) Inc. has recently acquired additional shares to the extent of 4.99% for about Rs 53 crore through open market.
Suzlon Group, which recently bought the Big Sky Wind Farm in Illinois from Edison Mission Energy, has sold it to EverPower Wind Holdings.
Welspun Corp has moved higher by 12% to Rs 80.30 to its 52-week high after the company said it has won fresh domestic orders to take its current order book to Rs 5,800 crore.
The IT sector had a lacklustre trading session, with Infosys slipping by 1.1% at Rs 3253, TCS weakening by 0.7% to Rs 2134 and Wipro shedding 0.4% at Rs 553.