After losing 255 points in the previous session, the Sensex rebounded from four-month lows and ended 173.47 points, or 0.86 per cent, higher at 20,366.82. The surge was led by stocks of IT, telecom, banking and refinery sectors. Today's gain is the best since the 256.61-point jump on January 15.
In the 30-share index, 21 stocks gained led by the three most influential - Reliance Industries, ITC and Infosys. RIL shot up by 1.74 per cent, ITC by 0.96 per cent and Infosys by 1.65 per cent. Tata Motors (3.25 per cent) and GAIL (2.56 per cent) were the biggest gainers.
"WPI for January eased to seven-month low level at 5.05 per cent. IIP showed contraction in December. This has triggered hopes of some easing in interest rates in next monetary policy. Rate sensitives, after initial weakness, recovered strongly from day's low," said Rakesh Goyal, Senior Vice President, Bonanza Portfolio.
Data yesterday had revealed that retail inflation fell to 24-month low at 8.79 per cent in January.
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Brokers said the Indian market received another push on reports of firming Asian and European markets as data showed the euro-area economy grew more than forecast in fourth quarter.
Bharti Airtel rose 0.86 per cent and Idea Cellular by 0.80 per cent. Reliance Communications scrip gained for the first time in six days, surging 1.98 per cent.
Sectorally, the BSE IT sector index gained the most by rising 1.39 per cent, followed by Teck index 1.22 per cent, Oil and Gas index 1.21 per cent and Consumer Durables index 0.94 per cent.
The Sensex lost 9.74 points since last Friday's closing -- the third straight weekly drop.