The Sensex and the Nifty rose nearly 1 per cent on hopes Prime Minister Narendra Modi would be able to steer a Bill seeking to raise foreign investment limit in the insurance sector through the Upper House of Parliament, raising optimism about further economic reforms.

Sentiment also turned positive after the International Monetary Fund said India's economy was recovering and its ability to withstand external shocks had improved.

The 30-share BSE index Sensex surged 271.24 points or 0.95 per cent at 28,930.41 and the 50-share NSE index Nifty jumped 76.05 points or 0.87 per cent at 8,776.

The gains on Thursday snapped a three-session losing streak and analysts said markets could resume gains towards record highs hit early this month should the government be able to pass reforms through an Upper House of Parliament dominated by the Opposition.

Brokers' comment

"Overall sentiment is good and market is moving in anticipation of positive measures from the government. The recent fall has given a farily good chance to enter the market," said Suresh Parmar, head, institutional equities at KJMC Capital Markets.

Brokers said fresh positions created by participants ahead of key economic data — industrial production (IIP) numbers for January and consumer price index (CPI) data for February — to be released later in the day, contributed to the rise.

Gainers, losers

Top five Sensex gainers were SSLT 3.63%, NTPC 3.54%, Hindalco 3.37%, Sun Pharma 2.46% and Tata Motors 2.35%, while the major losers were Dr Reddy's 1.4%, Coal India 1.23%, M&M 1.06%, Bajaj Auto 1.01% and HUL 0.73%.

Insurance companies gained on expectations the Upper House of Parliament would vote on legislation proposing to increase the foreign investment limit in insurers to 49 per cent from 26 per cent as early as Thursday.

However, the government faces a tougher battle in passing other legislation, including a land reform Bill that could face strong opposition in the Upper House of Parliament.

Max India added 5.49 per cent and Reliance Capital gained 10.92 per cent

ITC surged 2.35 per cent after a CLSA report said the company has raised the prices by 10-25 percent across key cigarette brands.

Some recent underperformers such as metals and miners also gained on value-buying after the government said it will impose an anti-dumping duty on stainless steel product imports.

Jindal Stainless advanced 11.43 per cent and Tata Steel gained 2.32 per cent.

Sectoral indices

All BSE sectoral indices ended in the green. Among them, power index was the star-performer and was up 2.27 per cent, followed by infrastructure 1.9 epr cent, realty 1.53 per cent and consumer durables 1.49 per cent.

Early trade

The 30-share index surged 220.85 points or 0.77 per cent to 28,880.02 as all sectoral indices, led by power, capital goods and banking, were trading in positive zone with gains up to 1.54 per cent.

The gauge had lost 790 points in the previous three sessions.

Similarly, the National Stock Exchange index Nifty regained the 8,700-mark by gaining 66.55 points or 0.76 per cent to 8,766.50.

Global markets

The euro pulled out of its recent dive and the dollar eased off the accelerator pedal on Thursday, as markets took a breather after a week of breakneck moves in the world’s two biggest currencies.

The pause by the dollar gave some respite to emerging markets as well as oil and commodities heavily correlated to the US currency's strength, and helped MSCI’s main world stocks index secure its first rise in five days.

After surging over 1.5 per cent on Wednesday and now 15 per cent since the start of the year, European bourses saw another solid start with London, Frankfurt and Paris up 0.6, 0.2 and 0.1 per cent respectively.

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