The BSE benchmark Sensex on Thursday surged by 390 points to close at a one-week high of 26,637.28 on across-the-board buying, tracking a rally in world markets after the US Fed Reserve signalled that a rate hike would not be immediate to support global recovery.
Similarly, the 50-share NSE Nifty regained 7,900 level by rising 117.85 points or 1.5% to its highest level in four days to 7,960.55.
The 30-share Sensex resumed in the positive zone and gathered momentum to touch session's high of 26,688.70, before settling at 26,637.28, a rise of 390.49 points, or 1.49%. This is also its best single day gain since it had zoomed 480.92 points, or 1.81% on September 18 and one-week closing high since 26,744.69 on September 24. The gauge had lost over 383 points in the past three sessions.
"The rally was fired by the dovish Fed minutes which suggested that rate hike will not be sooner. Global markets rallied and European markets also opened in green and showed strong momentum thus providing strength to Indian markets," said Kiran Kumar Kavikondala, director and CEO, WealthRays Securities.
Brokers also said a recovery in rupee also bolstered the sentiment. "Strength in equity markets after recent correction and outflows also provided strength to the rupee. RBI announced an OMO of Rs 10,000 crore to suck liquidity from the market," they added.
Of the 30-Sensex shares, 25 ended higher led by BHEL (8.37%), Hindalco (6.01%) and SBI (2.84%), while five shares ended lower, led by Wipro (down 0.83%). Among the BSE sectoral indices, capital goods rose by 3.01% followed by realty 2.61% and bankex 2.51%.
"It (the rally) was mainly on the back of Fed's soft statement that has triggered recovery in almost all the world markets," said Shrikant Chouhan, Head- Technical Research, Kotak Securities.
Asian markets including key benchmark indices in Singapore, Taiwan, Hong Kong, Japan and China rose by 0.28% to 1.17%, while Japan's Nikkei eased by 0.75%.
European markets were also trading higher as indices in France, Germany and UK moved up by 0.62% to 1.17%.
In the US markets on Wednesday, the S and P 500 rose by 33.79 points or 1.75% - its biggest one-day gain in 12 months. The Dow Jones Industrial Average also jumped by 274.83 points or 1.64% - it's biggest one-day advance this year. The Nasdaq Composite COMP gained by 83.39 points or 1.91%.
Jignesh Chaudhary, head of research, Veracity Broking Services said, "Equities traded strong... as Asian markets traded positively, with the regional index rising from its lowest level since May as Fed Reserve, on Wednesday, in its minutes stated that the interest rate will remain near zero for the considerable time after it stops buying assets."
Meanwhile, FPIs/FIIs pulled out Rs 1,440.99 crore from domestic equities on Wednesday, as per provisional exchange data.
Mid-cap and Small-cap indices also rose by 1.83% and 1.59% respectively on fresh buying from retail investors.
Meanwhile, the provisional data released by the stock exchanges showed that foreign portfolio investors (FPIs) sold shares worth a net Rs 1,440.99 crore on Wednesday.
The total market breadth turned positive as 2,015 stocks closed higher while 932 finished lower. Total turnover dropped to Rs 2,665.52 crore from Rs 2,796.49 crore on Wednesday.
"The equity benchmarks were seen rebounding strongly following positive global cues. On Wednesday, the global markets, especially the US, witnessed their biggest one day gain of the year after minutes of Federal Open Market Committee (FOMC) meeting reaffirmed the central bank's intent to be careful in raising interest rates.
"Recovery in rupee against the US dollar further strengthened the sentiments. In line with the benchmark, almost all the sectoral indices were seen gaining between 1 to 3% each, except the defensive pack," said Jayant Manglik, president of retail distribution, Religare Securities Ltd.