The benchmark BSE Sensex surged over 240 points and the NSE index Nifty approached the key 9,000-level as stronger-than-expected economic growth eased worries about the impact of the government's demonetisation drive.
Domestic sentiment was also buoyed as Nikkei India Manufacturing Purchasing Managers’ Index rose to 50.7 in February from 50.4 in January.
The broader NSE index closed up 66.2 points or 0.75 per cent at 8,945.8, not too far from the key level of 9,000.
The benchmark BSE index rose 241.17 points or 0.84 per cent to end at 28,984.49.
Among BSE sectoral indices, realty index gained the most by 3.46 per cent, followed by metal 1.91 per cent, FMCG 1.3 per cent and banking 0.96 per cent. On the other hand, oil & gas index was down 0.91 per cent, power 0.38 per cent, consumer durables 0.19 per cent and PSU 0.15 per cent.
Top five Sensex gainers were Tata Steel (+3.66%), M&M (+3.13%), Dr Reddy's (+2.56%), ITC (+2.46%) and Sun Pharma (+2.26%), while the major losers were GAIL (-1.93%), NTPC (-1.87%), Tata Motors (-1.55%), Bharti Airtel (-0.7%) and Reliance (-0.33%).
GDP growth
The risk appetite improved after the Central Statistics Office had yesterday showed that India’s economy expanded by 7 per cent in the third quarter, belying all fears of the note ban puncturing economic activity.
The government pegged GDP growth at a higher-than-expected 7.1 per cent for 2016-17 despite the cash blues, with manufacturing and agriculture doing exceptionally well, which in turn made India retain the tag of the world’s fastest growing large economy.
The GDP projection for the fiscal at 7.1 per cent in the second advance estimate is the same as the first one put out by the CSO in January.
Global markets
The dollar and US Treasury yields jumped on Wednesday, while stocks were mixed , as investors focused less on US President Donald Trump's first speech to Congress and more on what they see as a growing chance of a US interest rate hike this month.
Reaction in Asian stock markets to Trump's speech was also largely muted, with the MSCI's broadest index of Asia-Pacific shares outside Japan down about 0.2 per cent.