Investors drove up stock prices today, pushing the market bellwether Sensex higher by 236 points, as they lapped up shares following broad hints that the government won't constrain foreign fund inflows.

Planning Commission Deputy Chairman Montek Singh Ahluwalia reportedly ruled out the possibility of imposing tax to curb foreign funds, key for developing infrastructure in the country.

After a two-day downward correction, the Bombay Stock Exchange 30-share barometer bounced back to settled the day at 17,021.85, gaining 236.20 points or 1.41 per cent over its previous close.

The market yesterday shed 213 points on fears of steps to check capital inflows into equity.

Brokers said domestic operators and Foreign Institutional Investors hectically covered short positions after comments from Ahluwalia.

The approaching expiry of derivatives series on November 26, however, caused high level of volatility in the market.

Energy giant Reliance Industries rebounded from its day's low of Rs 2,051 to end 2.07 per cent higher over last close.

European markets were trading nearly 1.0 per cent higher in their early trade this afternoon.

Among Sensex stocks, cement maker ACC jumped 4.55 per cent, Hindalco by 3.47 per cent, Jaiprakash by 2.73 per cent, Tata Steel by 2.66 per cent) and HDFC by 2.58 per cent.

Country's largest lender SBI rose by 2.42 per cent, realty major DLF by 2.29 per cent and largest software exporter TCS gained 2.02 per cent at close.

However, telecom major Bharti Airtel fell by 1.40 per cent and Reliance Infra by 0.62 per cent.

Among the sectoral indices, the BSE-Bankex rose by 1.95 per cent followed by the BSE-Oil & Gas by 1.52 per cent and the BSE-Metal by 1.37 per cent.

The broader 50-share Nifty of the National Stock Exchange surged by 70.95 points, or 1.42 per cent, to regain the key 5,000 points level. It closed at 5,059.95 points.

The market is expected to witness volatile trade in the next few days ahead of the expiry of F&O contract.

The market breadth was strong with 1,452 gainers against 1,240 losers on BSE.

The trading volume was higher at Rs 5,399.05 crore compared to Rs 5,092.15 crore on Thursday. Edelweiss Capital clocked the day's highest turnover of Rs 275.32 crore followed by HDIL (Rs 210.49 crore), Suzlon Energy (Rs 207.14 crore), JSW Steel (Rs 196.98 crore) and SBI (Rs 180.16 crore).