Besides, a steep hike of Rs 5 a litre on heavily subsidised diesel by the Cabinet Committee on Political Affairs (CCPA) yesterday to bring down the burgeoning fiscal deficit bolstered investor sentiment.
The BSE 30-stock index, Sensex, resumed higher at 18,284.75 and shot up further to 18,456.33 before quoting at 18,392.95 at 1030 hrs, up 371.79 pts or 2.11 per cent.
The NSE 50-share Nifty also rose by 114.60 points or 2.11 per cent to 5,549.85 at 1030hrs.
Major gainers were Hindalco (5.03 pc), ICICI Bank (4.62 pc), SBI (4.26 pc), Tata Motors (4.21 pc), Tata Steel (4.16 pc), Jindal Steel (4.15 pc), Sterlite (3.82 pc), Gail India (3.36 pc), Maruti Suzuki (3.32 pc), Tata Power (3.04 pc) and RIL (2.52 pc).
Asian stocks made gains in the early trade after the US Federal Reserve announced an aggressive new stimulus plan to revive growth in the world's largest economy.
Key indices in Japan, South Korea, Singapore, Taiwan China, Hong Kong and Indonesia gained by up to 2.67 per cent.
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US markets surged yesterday after the Fed announced to buy back USD 40 billion worth of mortgage securities per month, to keep borrowing rates low.
The Dow Jones Industrial Average ended up 206.51 points or 1.55 per cent and the Nasdaq Composite index gained 41.51 points or 1.33 per cent.