Moreover, reports that retirement fund body (EPFO) will start investing in equity markets next week, helped too.
Boosted by the news, NSE Nifty regained the 8,500-mark to close at 8,532.85, showing a rise of 111.05 points or 1.32 per cent. It logged an intra-day high of 8,548.95.
Tepid July rollovers hinted at a cautious approach ahead of RBI's rate announcement on 4th August, traders said.
The benchmark BSE index after opening higher at 27,814.51, moved further up to regain 28,000-mark and touched the day's high of 28,161.17 before settling at 28,114.56 points, a steep rise of 409.21 points, or 1.48 per cent.
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The previous best one-day gain was on June 22 when Sensex had rallied by 414.04 points. The gauge has now garnered 655.33 points in three straight sessions.
On a weekly basis, both, BSE Sensex and NSE Nifty, ended largely flat.
Meanwhile, EPFO will kickstart the process of investing in the stock market on August 6 with an initial corpus of Rs 5,000 crore to be invested through ETFs in the current fiscal.
State-run SBI was the top gainer with a rise of 5.25 per cent, followed by Coal India 4.55 per cent, Lupin 4.26 per cent, Dr Reddy's 4.05 per cent, Hero MotoCorp 3.36 per cent, ITC 3.29 per cent and M&M 3.25 per cent.
ICICI Bank climbed 3.97 per cent after it reported a 12.08 per cent growth in net profit at Rs 2,976.16 crore for the quarter ended June 30.
Globally, Asian stocks closed higher, while the European markets were little changed in their early trade on mixed earnings results.