The Bombay Stock Exchange (BSE) Sensex surged over 550 points or around 3 per cent on Tuesday as the Indian rupee neared the 64 per dollar mark.
The broader Nifty jumped over 160 points to edge above the key 5,850 levels.
The partially convertible rupee hit a high of 64.16 and is on track for its fourth straight day of gains after snapping a three-week losing streak.
As of 12.35 p.m., the rupee traded at 64.35 as against Friday's close at 65.24 per dollar.
The rupee tracked higher euro, which gained against the dollar after disappointing US jobs data raised hopes that the Fed Reserve may be hesitant to announce tapering of stimulus as early as next week.
A surge in exports also helped market sentiment.
India's merchandise exports posted double-digit growth in the month of August, while imports were "contained", trade secretary S. R. Rao said on Monday.
Sentiment in the currency has improved since Reserve Bank of India governor Raghuram Rajan unveiled a slew of proposals to support the rupee and open up markets on Wednesday, providing a breath of fresh air for investors unnerved by the country's worst economic crisis in two decades.
