The 30-share Sensex on the Bombay Stock Exchange posted a sharp rise of 539.11 points to settle the day at 17,231.11. This is the biggest rally since November 4, when it gained 524 points.
The key index touched the day's the high of 17,252.09 on all-round buying support and all the index stocks ended in the positive terrain.
Wider National Stock Exchange index Nifty also spurted by 158.75 points to close at 5,144.60. It touched the day's high of 5,150.60 points.
Marketmen said there was a sudden spurt in buying across-the-board after Finance Minister Pranab Mukherjee in New Delhi said that economy would grow 7.5-8 per cent. "The Mid Year Review projected a growth rate of 7.75 per cent (for 2009-10), but it would be more appropriate to say 7.5 to 8 per cent", he said addressing the 104th annual session of the industry chamber PHDCCI.
He also hinted that fiscal stimulus given to the industry would not be withdrawn before the next Budget.
A sharp rebound in Asian and European stock markets following a strong US data and expectations of a speedy recovery in the US economy further boosted the market sentiment.
The massive rally even surprised the marketmen, who said that funds', which are already in holiday mood, buying spree was quite surprising.
Brokers said the strong surge was aided by the short-coverings as the markets will remain closed on December 25 for Christmas and on December 28 for Moharram and again on January 1, 2010 on account of the new year. December 31 is the last day of the derivatives contract,forcing operators to wind up their short positions.
There was all round buying across the counters in the later part of the day as domestic institutional investors too stepped in to support the market, that was under long dry spell till yesterday.
Today's rise of the Sensex was the highest since May 18, 2009 when the market was shot up by a record 2,110.79 points as the Congress-led UPA government came to power with a clear majority.
Finance Minister Pranab Mukherjee today said the economy could grow by 7.5 to 8 per cent during the current fiscal, making the market sing the new year jingles before a week.
Asian indices too ended higher by about 0.35 per cent and 1.91 per cent on better-than-expected existing home sales data in the US while the European markets too showed a firm trend in their morning trade. The CAC was up by 0.65 per cent, the DAX by 0.57 per cent and the FTSE by 0.71 per cent.
The counters that led the rally following heavy buying support were the metals, refinery, power, capital goods and IT
The rally was so strong that all the 30-share Sensex counters ended with sharp to moderate gains while all sectoral indices too finished higher by about 4.05 per cent and 0.79 per cent.
Geojit's Mathew said, "there was all round buying across the counter in the later part of the day as domestic institutional investors stepped in to support the market. However, the Sensex upside is capped between 17,352 and 17,361. So such kind of a momentum is not expected tomorrow."
None of the 30-share Sensex stocks closed in the red. From the Sensex pack, Hindalco flared up by 7.77 per cent, NTPC by 6.96 per cent, Sterlite by 5.05 per cent, RIL by 4.62 per cent, Tata Steel by 4.45 per cent, ICICI Bank by 4.30 per cent, Jaiprakash Associates by 3.38 per cent, L&T by 3.37 per cent, Rel Infra by 3.31 per cent, Infosys by 3.28 per cent and M&M by 3.04 per cent.
From the sectoral indices, the BSE metal flared up by 665.37 points or 4.05 per cent, the BSE oil & gas by 342.85 points or 3.43 per cent, the BSE power by 101.28 points or 3.37 per cent, the BSE consumer goods by 404.11 points or 2.99 per cent and the BSE IT index by 147.68 points or 2.95 per cent.
The overall market breadth was highly positive as 1,907 stocks ended with gains against 924 that closed with minor losses on the BSE.
The trading volume rose sharply to Rs 4,981.61 crore Rs 3,640.08 crore on Tuesday. Tata Steel remained the top traded share with the highest turnover of Rs 215.61 crore followed by RIL (Rs 146.93 crore), Zandu Pharma (Rs 143.07 crore), Suzlon Energy (Rs 141.77 crore) and HDIL (Rs 110.05 crore).