The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened in the positive at 16,919.14 points, ended the day at 17,143.68 points, up 1.81 percent or 304.49 from its previous close at 16,839.19 points.
The wider 50-scrip S&P CNX Nifty of the National Stock Exchange jumped 1.96 percent or 99.95 points at 5,199.80 points.
There was a strong buying support in interest rate sensitive banking, realty, auto and capital goods stocks.
Banking index of the BSE rallied 2.67 percent at 11,943.42 points. Power index jumped 3.58 percent at 1,900.67 points. Capital goods index grew 3 percent, realty index rallied 3.13 percent and auto index gained 2.26 percent.
The country's largest lender State Bank of India surged 4.63 percent at Rs.2,031.05. ICICI Bank jumped 3.89 percent at Rs.964.30.
Tata Motors, up 4.16 percent at INR221.65; Tata Power, up 4.12 percent at INR98.50; BHEL, up 3.82 percent at INR216.20; and L&T, up 3.38 percent at INR1,364.55, were among the major Sensex gainers in percentage term.
Of the 30 Sensex scrips, only three closed in the red. ONGC, down 0.31 percent at INR276.55; Hindustan Unilever, down 0.02 percent at INR464.60; and Wipro, down 0.01 percent at INR334.20, were the Sensex losers.
The Reserve Bank of India is scheduled to announce first quarter review of the monetary policy on July 31.
While some analysts are betting on a 25 basis points (0.25 percent) cut in key policy rates, a majority of them feel that the central bank was not in a position to cut rates given the current macro-economic situation.
In the mid-quarter review announced last month, the RBI had left key policy rates unchanged after cutting the rates by 50 basis points in April.