The 30-share Sensex ended the drought on Friday and rallied to a two-month high of 17,430 points — up 439 points, or 2.6 % — riding on Thursday's announcement on government's clampdown plan on tax avoidance and expectations of big-ticket reforms.
Plus, the European leaders' plan to rescue banks hit by sovereign debt worries and the resultant global rally helped Indian markets bounce back.
The rupee that slid nearly 26% in one year also clocked its biggest daily gain in three years and closed at 55.60 to the dollar — up by Rs. 1.20.
Investment bank Morgan Stanley, meanwhile, upgraded the Indian stock market to "equal weight" from "underweight". This may help equities fetch higher returns this year.Chief economic adviser Kaushik Basu said the economy will turn around by October. "We will have to get a couple of reforms in place. For that, the big stumbling block has been getting all the political parties in the coalition together."
A day after Prime Minister Manmohan Singh met key officials to discuss the economy, the government published on Thursday the draft rules of the controversial general anti-avoidance rules (GAAR) on deals and incomes suspected to have been specially structured to avoid taxes.
The draft rules say only incomes or transactions after April 1, 2013 — and not retrospectively — beyond a certain threshold limit will be covered by the GAAR.
It will not be invoked on the participatory notes, or P-Notes, which aid foreign investors to trade in equities without disclose their identities.