Market was in a positive mood following yesterday's rally after Reserve Bank Governor Raghuram Rajan sprang a surprise by announcing a bigger-than-expected rate cut of 0.50 per cent to 6.75 per cent, lowest in four-and-half-years to boost economic growth.
The 30-share Sensex stayed in the green throughout the session and touched a high of 26,179.70 before ending at 26,154.83, showing a rise of 376.17 points or 1.46 per cent -- its biggest single-day gain since September 9.
The NSE Nifty index regained the 7,900-mark by soaring 105.60 points or 1.35 per cent to close at 7,948.90.
Besides rate cut, a rebound in Asian and European markets, as investors snapped up bargain shares, after recent heavy falls that were sparked by global growth worries, too buoyed trading sentiments. Rupee strengthening against the dollar during the day also helped.
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Metal stocks were at the center of brisk activity on value-buying after recent sell-off and overnight gains in global commodities prices.
The BSE metal index gained the most by rising 3.36 per cent with stocks of Tata Steel and Hindalco emerging major winners by rising up to 5.24 per cent.
Banking stocks -- SBI and Axis Bank -- which made notable gains yesterday, lost some ground today.
Among other sectoral indices, FMCG rose 2.36 per cent, followed by infra 2.17 per cent, teck 2.07 per cent, realty 2.05 per cent, power 1.88 per cent and oil&gas 1.86 per cent.
Broader markets too remained in better shape as the BSE mid-cap rose 1.71 per cent and small-cap gained 1.07 per cent.
Globally, Asian markets closed in positive terrain and European shares were in better form in their early deals.