The benchmark S&P BSE Sensex today extended gains for the third session in a row, surging 290 points to close above the 19,000 level for the first time in three weeks as the rupee continued to strengthen.
Banking shares, led by ICICI Bank, remained the favourites following announcements by new Reserve Bank of India Governor Raghuram Rajan on Wednesday. ONGC was the other top gainer on the index, which rose for the second week.
Renewed buying by foreign institutional investors boosted sentiment. They bought a net Rs 1,101.41 crore of shares yesterday, as per provisional stock exchange data.
After adding 739 points in the previous two sessions, the Sensex resumed higher and moved in a range of 18,929.38 to 19,293.96 before ending at a three-week high of 19,270.06, a rise of 290.30 points or 1.53 per cent. The index has gained 650.34 points, or 3.49 per cent, this week.
"Markets have reacted on cues from the currency markets," said Dipen Shah, head of private client group research at Kotak Securities. "Further initiatives on the rupee and on fiscal reforms will help in taking the markets higher."
The CNX Nifty on the NSE rose 87.45 points, or 1.56 per cent, to a three-week high of 5,680.40. The MCX-SX's SX-40 index rose 183.35 points to settle at 11,391.56.
The rupee was quoted at about 65.50 a dollar from yesterday's close of 66.01 as India and Japan today expanded their currency swap arrangement to USD 50 billion from USD 15 billion in a bid to strengthen bilateral financial cooperation and stabilise the global financial markets.
The RBI's liquidity-tightening measures may be rolled back by October as market sentiment and the rupee are expected to improve, Barclays said in a report.
Brokers said market sentiment remained bullish after Rajan took over as the RBI chief and announced a slew of measures to attract capital flows and boost economic growth.
Banking, capital goods, PSUs and refinery stocks were in the limelight. ICICI Bank gained 7.37 per cent and ONGC rose 7.17 per cent, together contributing 138 points to the Sensex gain.
Asian stocks ended mixed ahead of the monthly US jobs report. Key indices in China, Hong Kong, Singapore and South Korea rose while indices in Japan and Taiwan declined. Indices in France, Germany and UK were trading lower.
In the domestic market, 20 Sensex shares rose, led by ICICI Bank and ONGC. The other big gainers were Bharti Airtel (5.47 pc), Cipla (4.49 pc) and Larsen and Toubro (3.58 pc).
Tata Power dropped 2.61 pc, followed by Coal India 2.12 pc, Sesa Goa (1.9 pc) and Hindustan Unilever (1.62 pc).
Among the sectoral indices, S&P BSE-Bankex rose 2.89 pc, followed by S&P BSE-Capital Goods 2.77 pc, S&P BSE-Oil&Gas 2.2 pc, S&P BSE-PSU 2.11 pc and S&P BSE-Power 1.8 pc.
The market breadth remained positive as 1,311 stocks ended higher while 996 finished lower and 146 ruled steady. Total turnover increased to Rs 2,093.75 crore from Rs 2,062.18 crore yesterday.