Benchmark share indices ended 1% higher tracking a rally in European shares after the Bank of England on Thursday lowered its key interest rate by 25 basis points and unveiled a stimulus package to cushion the impact of its exit from the European Union.
The S&P BSE Sensex ended up 364 points at 28,078 and the Nifty settled 132 points higher at 8,683.
In the broader markets, BSE Midcap and Smallcap indices ended up over 1.5% each.
Market breadth remained strong with 1817 gainers and 917 losers on the BSE.
"There was covering of short positions with the clearance of the GST Bill in the Rajya Sabha and the quantitative easing by the Bank of England also aided the rally.
"Most of the gains were led by the Indian consumption sectors such as auto and financials among others," said A K Prabhakar, Head of Research, IDBI Capital.
Foreign institutional investors were net buyers in equities worth Rs 559 crore on Thursday, as per provisional stock exchange data.
Foreign funds have been on a buying spree since the past 20 trading sessions with investments of Rs 13,500 crore.
The Bank of England on Thursday reduced its benchmark interest rate to a record low of 0.25% from 0.5%, the lowest in its 322-year history.
Among European major markets, CAC, DAX and FTSE were trading 0.2%-0.5% higher.
Meanwhile, Asian markets trimmed early gains to end mixed with Nikkei, Straits Times and Shanghai Composite closing flat with marginal losses while Hang Seng ended up 1.4%.
The India Meteorological Department on Thursday said that monsoon rains during the week from 28 July to 3 August 2016 was above long period average (LPA) by 6%.
Further, reports suggest that the government is likely to table the GST Bill in the parliament on Monda, August 8.
The target for the rollout of the GST Bill is scheduled for April 01, 2017.
Gains were led by private lenders ICICI Bank and Axis Bank which rose 2.2%-3.5% each followed by SBI, and HDFC Bank.
Steel majors gained after the government extended the minimum import price (MIP) norms to 66 steel items for two more months.
SAIL, Tata Steel, Jindal Steel and JSW Steel ended up 2%-3% each.
Auto shares extended gains as the sector is likely to benefit the most from the implementation of the GST Bill as the effective tax rate is likely to be lower than the current tax of nearly 24%.
M&M, Bajaj Auto, Hero MotoCorp, Maruti Suzuki ended up 1%-3% each. Tata Motors ended nearly 3% higher on reports that July retail sales of its overseas arm JLR rose 34% year-on-year.
Among the index heavyweights Reliance Industries ended up over 1% ahead of its foray into the telecom sector with RJio.
Infrastructure stocks also witnessed renewed buying interest with L&T rose nearly 3% while BHEL gained 2.5%.
However, IT exporters were trading with marginal losses amid a stronger rupee and ahead of the US jobs data which is likely to signal the strength of the US economy.
Infosys, Wipro and TCS were down 0.1%-0.8% each.
Among other shares, Siemens ended nearly 2% higher after the board announced a special dividend of Rs 27.50 per equity share for the year ended March 31, 2016.
Thomas Cook gained over 3% after the company reported 56% growth in consolidated net profit at Rs 62 crore for the quarter ended June 30, 2016 compared with Rs 39.8 crore for the same quarter last fiscal.
Theatre companies are also among the major beneficiaries from the GST Bill. PVR surged over 10% after the company said it has inaugurated a 6-screen multiplex marvel at Xperia mall, Palava in the state of Maharashtra. Its peer Inox Leisure ended up 7%.
Image: The Bombay Stock Exchange. Photograph: Reuters