The recovery in rupee from its fresh record lows also helped the sentiment in the stock market.
While consumers and several political parties criticised the government for the increase hike in petrol prices, the stock market hailed the move sending energy stocks like ONGC (5.74 pc) and Reliance (1.35 pc) higher as investors believe this will give a push to further economic reforms.
However, oil marketing companies like IOC, BPCL and HPCL could not sustain their initial gains as pressure mounted on the government for a roll-back of petrol prices. Earlier in the day, investors were hopeful that the government would show conviction to hike prices of regulated diesel and cooking gas.
Investors were richer by nearly Rs 68,000 crore today as funds pumped were into blue-chips stocks such Bharti Airtel, HDFC, Jindal Steel and ICICI Bank.
Out of the 30 Sensex stocks, 24 scrips ended higher.
"An EGoM is scheduled tomorrow and will be keenly watched if the govt raises prices of the politically sensitive regulated fuels...We think this move (hiking petrol prices) is positive from a sentiment point of view, and suggests that the government could implement measures to stem the de-rating of the India story," said Rohini Malkani, Economist, Citi India.
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After opening at 16,033.90, the trading sentiment improved further as Sensex hit an intra-day high of 16,252.37 , before finally closing at 16,222.30 - a rise of 274.20 points or 1.72 per cent over its previous closing.
Brokers said apart from firm European cues, the rupee going back to 55-level after hitting an fresh low of 56.38 a dollar boosted mood today.
Similarly, the NSE 50-issue Nifty also spurted by 85.75 points or 1.77 per cent to 4,921.40.
Buying was seen across the board as all 13 sectoral indices closing higher with up to 2.33 per cent gains. (MORE)