Reserve Bank Governor Raghuram Rajan's comments that India's exposure to Greece is limited also boosted sentiment.
In a statement yesterday Rajan said that he was confident of economic recovery, while adding that capital investments are picking up.
Meanwhile, foreign investors bought shares worth Rs 575.3 crore yesterday, according to provisional data.
With an eye on improving farm productivity, the government decided to spend Rs 50,000 crore over the next five years under the Pradhan Mantri Krishi Sinchai Yojana (PMKSY).
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The 50-share broader Nifty surged 40.00 points or 0.47 per cent to close at 8,484.90 after hovering between 8,497.75 and 8424.15 during the session.
Stocks of housing finance company, HDFC, topped among Sensex gainers by surging 2.53 per cent to Rs 1,316.05, followed by Hero MotoCorp rising 1.77 per cent to Rs 2,577.80.
Shares of Lupin gained 1.64 per cent after the company announced acquisition of Russia's Biocom, marking its foray into the Russian pharma market.
On weekly basis, Sensex and Nifty has gone up by 280.95 points (1.01 per cent) and 103.80 points (1.23 per cent), respectively, completing their third straight weekly gain.
Sectorwise, BSE banking index gained the most by surging 0.76 per cent, followed by capital goods 0.57 per cent, FMCG 0.46 per cent, healthcare 0.41 per cent, consumer durables 0.33 per cent and IT 0.28 per cent.
Globally, Asian markets ended mixed and European stocks were down in their opening trade.