The BSE benchmark index climbed 147.08 points, or 0.82 per cent to close at 18,000.03 on heavy buying in metal, auto, capital goods shares. The index had gained 541 points in last five sessions.
Industrial production growth rate slowed to just 0.1 per cent cent in July due to poor show by manufacturing, mining and capital goods sectors.
"July industrial growth came in line with our muted expectations. With growth set to slow below the RBI's 6.5 per cent forecast, we expect a 0.25 per cent CRR cut (on Monday) to soften lending rates," said Indranil Sengupta, India Economist, Bank of America Merrill Lynch.
As many as 21 stocks in Sensex closed with gains. Tata Motors which rose 5.3 per cent led the winners, followed by Jindal Steel (3.8 pc), Coal India (2.9 pc) and L&T (2.8 pc).
Brokers said the domestic market received a further boost as Asian and European shares jumped after Germany's top constitutional court allowed the country to ratify the euro-area bailout fund with certain conditions.
"German court's ruling today, affirming the implementation of Eurozone's new rescue fund and budget pact, also helped the market sentiment," said Nidhi Sarswat, Senior Research Analyst, Bonanza Portfolio.
The broad-based National Stock Exchange index Nifty closed 41 points, or 0.76 per cent higher at 5,431.
Traders said airline shares extended gains on hopes of permission to allow foreign direct investment into the sector. Spicejet, Kingfisher and Jet Airways recorded handsome gains.
