Besides, the Finance Ministry's proposing a monetary limit for invoking the controversial General Anti-Tax Avoidance Rules (GAAR) in its draft guidelines issued late last night lifted the trading sentiment, brokers said.
After a firm start, the Sensex advanced further by 410.20 points to 17,496.96 at 1445 hrs, a level last seen on May 2, led by a rally in stocks of finance, auto and capital goods sectors.
The broad-based National Stock Exchange index Nifty spurted by 120.35 points to 5,269.50 on buying by foreign as well as domestic funds.
Buying activity gathered momentum after Prime Minister Manmohan Singh, who took additional charge of finance portfolio signalled speedy revival of slowing economic growth.
The finance ministry's proposal that GAAR provisions would be invoked only in cases where FIIs choose to take the benefit of double tax avoidance treaties, providing some relief to funds, also supported the sentiment.
Meanwhile, the rupee appreciated by 47 paise to 56.33 against the US dollar at the Interbank Foreign Exchange market on hopes that the government steps will check the currency's slide, aiding market sentiment.
Asian and European markets also surged after late night meeting of European leaders that came up with a plan for a single financial supervisory mechanism for the European region to help stabilise markets.
