The S&P BSE Sensex soared over 470 points on heavy capital inflows as the Economic Survey has projected 8.1-8.5 per cent GDP growth in 2015-16 compared with 7.4 per cent in the previous fiscal.
The survey will be the basis for the 2015/16 federal budget to be unveiled by Finance Minister Arun Jaitley on Saturday.
Blue-chips rallied on hopes that the government would deliver a budget that increases public investment but sticks broadly to its fiscal deficit targets.
The Economic Survey has reiterated that the country would not overshoot its deficit target of 4.1 per cent of gross domestic product in the current financial year ending March. It also stood by a medium-term target of cutting it to 3 per cent of GDP.
"I think markets are quite confident about the budget. I think the budget will underline the various initiatives that the government has taken and going to take, which will cheer up the economy," said Deven Choksey, managing director, KR Choksey Securities.
The Sensex rallied 473.47 points or 1.65 per cent at 29,220.12, its biggest single-day gain since January 20. Similarly, the Nifty jumped 160.75 points or 1.85 per cent at 8,844.60.
Barring FMCG, all other BSE sectoral indices ended significantly in the green. Among them, realty index was the star-performer and was up 4.25 per cent, followed by capital goods 3.8 per cent, power 3.17 per cent and metal 3.02 per cent, while FMCG index was down 0.21 per cent.
Top five Sensex gainers were Tata Power 5.43%, L&T 4.67%, ICICI Bank 4.25%, SSLT 4.2% and Hindalco 3.67%, while the major losers were GAIL 1.07%, ITC 0.47%, Wipro 0.36% and HUL 0.15%.
Brokers said fresh buying by investors as well as foreign funds on robust growth projections in the Economic Survey buoyed the trading sentiments here.
Besides, a firming trend in global markets triggered the buying activity here, they added.
European shares rose to fresh seven-year highs on Friday, extending a two-month rally fuelled by the European Central Bank’s money printing programme which starts in the coming weeks.
The FTSEurofirst 300 index index of top European shares was up 0.3 per cent at 1,561.60 points, with strong annual results from Airbus Group, the world’s second-largest aerospace company, spurring the rally.
Asian equities mostly retreated from multi-year highs after falls on Wall Street overnight, with the MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.1 per cent after advancing to a five-month high on Wednesday.