The government's decision on Thursday to offload 10 per cent stake in all listed PSUs lifted the benchmark Sensex from initial losses to close higher by over 150 points.
The 30-share index, which plunged by 347 points during intra-day trade, suddenly got buying support after Home Minister P Chidambaram announced the government's decision.
The index finally closed at 16,063.90, higher by 151.77 points or 0.95 per cent from its previous close.
Anil Ambani Group companies Reliance Infra and Reliance Communications posted hefty gains of over 5 per cent to emerge as the best Sensex stocks today.
Metal stock Hindalco, which was on a roller-coaster ride for the past two days, was another winning stock at 5.08 per cent. Besides RCOM, telecom stock Bharti Airtel also soared by 4.50 per cent. Brokers said shares of telecom companies rose on reports that the government may lower fees.
Among the 30 index stocks, 23 gained while the other seven closed lower.
National Stock Exchange index Nifty also rose by 54.75 points at 4,765.55
Traders said buying at existing lower levels pushed up the market. Funds covering their pending positions created in recent bearish phase further supported the uptrend, they added.
Reports of direct tax collection rising by 3.92 per cent to Rs 1,73,447 crore for the first seven months of the current fiscal also boosted the trading sentiment.