Sensex, which rose for the fourth straight day, opened with a 144-point with the Finance Ministry announcing the draft GAAR guidelines late last night.
Sentiments improved further as foreign inflows poured in after global investment bank Morgan Stanley upgraded India markets to "equal-weight" from the long-standing "under-weight" status.
The bullish sentiment was further supported by news that meeting of EU leaders have come up with a plan for a single financial supervisory mechanism for the debt-ridden region.
The BSE benchmark index settled at 17,429.98 - a level last seen in April 19 -- higher by 439.22 points or 2.59 per cent. The gauge surpassed its previous biggest single-day gain of 434 points on June 6.
As many as 29 out of the 30-share Sensex ended higher with gains led by Jindal Steel that rose 8.74 per cent, followed by Tata Power,ICICI Bank, Bhel and Sterlite which rose in the 5-6 per cent range.
In the broader market, nearly 1,870 stocks rose with investor wealth going up from Rs 60.35 lakh crore to Rs 61.52 lakh crore.
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The 50-share National Stock Exchange index Nifty spurted by 129.75 points, or 2.52 per cent to 5,278.90 on fund-based buying in capital goods, power and banking stocks.
The Sensex has gained nearly 550 points in the last four days coinciding with Prime Minister Manmohan Singh himself taking over charge of Finance portfolio and signalling speedy revival of the slowing economic growth.
Meanwhile, the rupee rebounded by 91 paise to trade at 55.89 against the US dollar on hopes that the government steps will check the currency's slide, also aiding market sentiment.