The 30-share BSE Sensex soared to the highest point of the day as buying picked up in the last hour of trade. Positive global cues and a turnaround in domestic sentiments drove the Sensex 450 points higher. The Sensex and Nifty traded with over 2.5% gains, and were the top gainers among Asian markets.
European stocks maintained morning gains on the back of the agreement to use the continent's permanent bailout fund to recapitalize struggling banks. EU leaders also agreed to the idea of a tighter union in the long term.
Spain's IBEX index traded off the day's high, rising 2.4% while the CAC 40 benchmark in France extended gains, rising 2.4% higher. Earlier, Asian stocks closed near the day's high. The benchmark in Hong Kong jumped 2.2%, while Japan's Nikkei index ended 1.5% higher.
Domestic sentiments were boosted by the new draft guidelines on the general anti-avoidance rules (GAAR) announced late night yesterday. According to the guidelines, the tax evasion rule will be invoked only in those cases where foreign investors have opted to take the benefit of tax avoidance treaties. The rules would not apply retrospectively and will be triggered only above a certain income threshold.
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Markets are likely to give thumbs up to these measures, analysts say.
'There is some cause for hope. Over the last two days, there have been new people at the finance ministry... Last night, the draft guidelines for GAAR have been out and they seem logical... Markets have been hearing about gloom and doom so far, so given the amount of bad news over the last 30 days, this gives some hopes," Shanti Ekambaram of Kotak Bank told NDTV Profit.
At 2.10 p.m., the Sensex traded 446 points higher at 17,436, while the Nifty index advanced 131 points higher at 5,280. The rupee surged over 1.6% and traded at 55.90 to the dollar.
All groups of stocks traded with large gains. ICICI Bank, ITC, Reliance Industries, L&T, and HDFC Bank were the top Sensex movers, adding over 200 index points to the BSE benchmark.
Oil and gas major Cairn India (-6%) and oil refiner BPCL (-0.85%) were the only stocks trading lower on the Nifty index. Cairn India shares fell after its erstwhile promoter Cairn Energy sold shares in the open market.
The market breadth was strong with over 87% stocks rising on the broader BSE 500 index.
With inputs from Associated Press
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