The BSE benchmark Sensex on Monday surged 207 points, led by interest-senstive stocks from realty and banking as RBI cut short term lending rate to boost economic growth.
The BSE 30-share index, which had gained 56 points on Monday, advanced further by 206.99, or 1.21% to 17,357.94.
The NSE 50-share index Nifty shot up 63.50 points, 1.22% to 5,289.70.
The Reserve Bank's slashing of short-term lending rate after a gap of three years by bigger-than-expected 0.50% to 8% brought cheer to the market as the move would reduce the cost of home, auto and corporate loans.
"The repo rate cut will provide the boost to investment as well as send a strong signal that turning around growth is of pivotal importance," CII Director General Chandrajit Banerjee said.
RBI had raised lending rates 13 times between March 2010 and October 2011 to contain inflation that had been hovering close to double-digit.
Higher openings in European markets further boosted the trading sentiment in the domestic market here.
The realty sector index gained the most by adding 2.41% to 1,824.33, followed by metal index - 2.01% to 11,178.84. The bank index rose 0.79% to 12,123.84.
Major gainers were Infosys, Hero MotoCorp, SBI, ICICI Bank, TCS, L&T, Bajaj Auto, Coal India, Gail India, DLF Ltd. and Tata Steel.