Led by the recent economic reforms announced by the government, the benchmark BSE Sensex surged 248.16 points to end at a new closing peak of 27,346.33 and the NSE index Nifty rose 78.75 points at 8,169.20.
Domestic sentiment was buoyed on increased buying by investors as the recent economic reforms have instilled confidence that the country can better withstand potential rate hikes in the US.
All BSE sectoral indices ended in the green. Among them, realty index was the star-performer and was up 3.44 per cent, followed by IT 2.04 per cent, TECk 1.77 per cent and oil & gas 1.65 per cent.
Gainers, losers
Reliance, TCS, Hindalco, Infosys and GAIL were the top five gainers among 30-share Sensex constituents, while the top five losers were SSLT, M&M, Cipla, Tata Power and Hero MotoCorp.
FDI rules relaxed
Among the recent economic reforms, the Government had yesterday relaxed FDI rules in the construction sector by reducing the minimum built-up area as well as capital requirement and easing the exit norms. Sharess of realty companies, particularly those with high debt, such as Unitech, DLF and Puravankara climbed after the announcement.
Global markets
The dollar surged to a three-week high, bond yields rose and gold fell on Thursday after the US Federal Reserve ended its six-year quantitative easing bond-buying programme.
The decision was widely expected, but a relatively hawkish tone to the accompanying statement was not. It prompted financial markets to rethink the growing consensus that the Fed's first interest rate hike would be late in 2015.
Stock market reaction was more mixed. Asian shares mostly fell, following a slight decline on Wall Street overnight. European bourses opened higher on Thursday, helped by encouraging corporate earnings, but quickly turned negative.
Overnight borrowing costs
In a statement on Wednesday after a two-day meeting, the Fed retained its basic guidance that overnight borrowing costs would remain near zero for a "considerable time".
But it dropped a characterisation of the US labour market slack as "significant" in a show of confidence in the economy's prospects, which markets perceived as a slightly hawkish turn.
In early European trade the dollar index, a broad measure of the greenback's trade-weighted value, was up 0.5 percent above 86.4.
European equity markets initially welcomed the Fed's statement as a sign that the US economy is in good shape, rather than taking fright at the prospect of interest rates perhaps rising sooner than had been expected.
But at 0930 GMT the EuroFirst 300 index of leading shares was down 0.1 per cent at 1317 points. Germany's DAX was down 0.4 per cent and France's CAC40 was down 0.1 per cent, shrugging off upbeat corporate updates from Alcatel Lucent, Technip and Renault.
Britain's FTSE 100 was down 0.5 per cent, and U. futures pointed to Wall Street opening around 0.2 per cent lower.