Short-covering ahead of derivatives expiry, coupled with lessened chances of a US rate hike and a recent economic reform buoyed the Indian equity markets on Wednesday.
Consequently, the barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) made healthy gains during the late-afternoon trade session.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) traded in the positive territory. It edged higher by 131.25 points or 1.73 percent, at 7,728.25 points.
The Sensex, which opened at 25,062.06 points, traded at 25,317.55 points (3.00 p.m.) -- up 417.09 points or 1.68 percent from the previous day's close at 24,900.46 points.
During the intra-day trade, the Sensex touched a high of 25,343.02 points and a low of 25,055.42 points.
The BSE market breadth favoured the bulls - with 1,724 advances and 694 declines.
The barometer index had dipped by 66 points or 0.26 percent on Tuesday.
Initially, both the key indices of the Indian equity markets opened on a positive note, in-sync with their Asian peers, especially the Chinese indices and a firm close of the US exchanges on Tuesday.
Market observers cited that short-covering ahead of the derivatives expiry and increased chances of a rate cut by the Reserve Bank of India (RBI) supported prices.
Investors expect the RBI to cut key lending rates on the back of the union budget's fiscal prudence measures, reduction in small savings interest rates and low inflation.
The RBI will conduct its first bi-monthly monetary policy review for 2016-17 on April 5.
In addition, Tuesday's economic reform measure to allow 100 percent foreign capital in e-commerce with some riders cheered investors.
The move is expected to benefit not just foreign multi-brand retail entities like Amazon and e-Bay, but also single-brand overseas chains like Adidas, Ikea and Nike.
Besides, dovish comments from the US Federal Reserve chairman Janet Yellen on Tuesday indicated lessened chances of a US rate hike.
A hike in the US interest rates is expected to have led away Foreign Portfolio Investors (FPIs) from emerging markets such as India.
Further, an appreciating rupee boosted investors' sentiments. The rupee opened the day's trade at 66.49 to a US dollar from its previous close of 66.54 to a greenback.
"Dovish comments from US Fed chairman Janet Yellen have lessened chances of a US rate hike. This has acted as a positive cue for the equity markets," Anand James, chief market strategist, Geojit BNP Paribas Financial Services, told IANS.
"Besides, short covering ahead of the derivatives expiry and increased chances of a rate cut by the RBI have supported prices and restored investors' risk taking appetite."
Vaibhav Agarwal, vice president and research head at Angel Broking, pointed out: "Bank Nifty is trading sharply higher after Vijay Mallya submitted a repayment plan of Rs.4,000 crore to the Supreme Court. Steel stocks are trading higher led by the extension of the safeguard duty."
Agarwal expects the markets to shift focus towards the monetary policy and 4Q (fourth quarter) earnings expectations after the F&O (futures and options) expiry.
