Shrugging off negative sentiments, the BSE Sensex Tuesday jumped by 154 points led by oil & gas, FMCG and banking shares after Prime Minister Manmohan Singh said the government is determined to take "tough" decisions to reverse the swelling fiscal deficit.
The BSE benchmark index, which tumbled 244 points Monday as RBI kept interest rates unchanged, bounced back to close higher by 153.97 points, or 0.92% to 16,859.80.
After opening lower, brokers said the market sentiment improved as the PM while addressing the seventh Summit of the G-20 countries said his government is determined to reverse the expansion of fiscal deficit even as he expressed confidence of bringing back the rhythm of 8-9 % growth.
A firming trend in European stocks as Greece moved towards forming a government and a Spanish debt sale meeting targets further fuelled the rally.
Oil & gas counters led by Sensex heavyweight Reliance Industries spurted on falling crude oil prices while ITC rose higher in FMCG shares, which are perceived as defensive bets in a volatile market. Bank stocks like ICICI Bank, HDFC Bank and SBI also rose around 1 %.
The 50-share National Stock Exchange index Nifty shot up by 39.60 points, or 0.78 % to 5,103.85 with stocks of refinery, FMCG and healthcare staging a smart recovery.
The market mood was also supported as finance minister Pranab Mukherjee in New Delhi said the government is taking steps to improve inflow of foreign investment.
The BSE-Oil and Gas sector index gained the most, rising 2.14 % as Reliance shot up by 2.58 % while ONGC gained 1.67 %.
The BSE-FMCG sector index was second best performer as it rose 1.58 %.
In the 30-share Sensex, 23 stocks closed higher while seven declined.