The Sensex and the Nifty rose over 1 per cent on Tuesday, marking their biggest daily gain in nearly 2-1/2 weeks, tracking higher global shares on hopes weak economic data would prompt the US Federal Reserve to leave options open on the timing of an interest rate hike.
The 30-share BSE index Sensex surged 298.67 points or 1.05 per cent at 28,736.38 and the 50-share NSE index Nifty jumped 90.15 points or 1.04 per cent at 8,723.30.
Barring IT and TECk, all other BSE sectoral indices ended significantly in the green. Among them, healthcare index was the star-performer and was up 1.82 per cent, followed by capital goods 1.7 per cent, FMCG 1.51 per cent and consumer durables 1.47 per cent, while IT index was down 0.32 per cent and TECk 0.16 per cent.
Top five Sensex gainers were Hindalco 5.75%, SSLT 4.02%, Dr Reddy's 3.66%, HDFC 2.62% and Tata Motors 2.47%, while the major losers were Infosys 1.1%, Coal India 0.78%, Tata Power 0.62%, Bharti Airtel 0.6% and Wipro 0.6%.
Investors hoped downbeat data on US manufacturing, industrial output and housing released on Monday would give the Fed a reason to toe a cautious line on policy.
The Federal Open Market Committee is scheduled to begin its two-day policy meeting later on Tuesday, and many analysts expect the central bank to drop the word "patient'' from its formal statement on the timing of its first interest rate increase since 2006.
"The risk of a Fed rate hike can certainly lead to 500-point fall in the BSE index," said G. Chokkalingam, founder of Equinomics, a Mumbai-based research and fund advisory firm.
The US macro data for April-June becomes key for the near term, he added.
Bank of America Merrill Lynch said the benchmark 30-shares index may touch 54,000 by end-2018 but will be range bound-to-negative over next few months.
Gains also tracked higher Asian peers. MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.7 per cent, after all three major US stock indexes posted gains of over 1 per cent on Monday.
Shares also got a fillip after IMF Managing Director Christine Lagarde had on Monday described Asia's third-largest economy as a rare bright spot on a cloudy global horizon.
European shares set 7 1/2-year highs on Tuesday, boosted by gains in Volkswagen after an encouraging report on auto sales.
Shares in Volkswagen rose 1.9 per cent after industry data showed new car registrations in Europe rose 7 per cent in February, with demand shifting from no-frills makes like Dacia towards mass-market brands like VW.
The pan-European FTSEurofirst 300 index was up 0.1 per cent at 1,596.94 points at 0844 GMT, after climbing to its highest level since late 2007 at 1,598.03 points.
Asian shares rose on Tuesday, following Wall Street's lead, as investors positioned for the possibility that weaker-than-expected US data will prompt the Federal Reserve to leave its options open this week on the timing of a future rate hike.