The Sensex closed above the 25,000 level and the Nifty index ended at a new high today powered by metal, power and oil & gas shares on hopes of a quick revival in domestic economy, amid strong expectations the European Central Bank will unveil a stimulus shortly.
Buying was strong with 11 of 12 sectoral indices posting gains between 0.17 per cent and 3.33 per cent.
Metal, oil&gas, power, FMCG, IT and capital goods led the surge. Persistent capital inflows from foreign funds into equity market and widespread buying by retail investors boosted the market sentiment, said traders.
India's services sector expanded for the first time in nearly a year during May on rebound in new business orders.
Foreign Institutional Investors bought shares worth a net Rs 192.56 crore yesterday, as per provisional data.
The BSE Sensex resumed higher, but dropped to a low of 24,644.88. It later recovered sharply to settle at its new closing high of 25,019.51, a rise of 213.68 points or 0.86 per cent. It breached previous closing peak of 24,858.59 hit on June 3.
The NSE 50-share Nifty also flared up by 71.85 points, or 0.97 per cent, to end at new peak of 7,474.10 -- surpassing its June 3 closing of 7,415.85.
There is growing speculation that the European Central Bank (ECB) will ease monetary policy later today to support a fragile recovery, said traders.
Metal and oil&gas prices usually go up after an economic stimulus on hopes some funds will come into such assets.
Sensex-based counters like Tata Motors, Sesa Sterlite, ONGC, Infosys, HUL, RIL, ITC, Tata Steel, Hindalco, TCS, HDFC, Axis Bank, Tata Power, Wipro, Hero MotoCorp and Gail closed with sharp to marked gains.
Banking stocks had a forgettable day as shares like ICICI Bank and HDFC Bank saw profit-taking.
"We may see Sensex levels at 30,000 before budget," said Motilal Oswal, CMD, Motilal Oswal Financial Services.
Meanwhile, Finance Minister Arun Jaitley will meet captains of Indian industry to elicit their views on the budget, which is likely to be presented in the first week of July.
As a part of the pre-budget consultation exercise, the Finance Minister has already met with agriculturists and will meet representatives of social sector later today.
Asian stocks ended mixed today as investors await a European Central Bank policy decision later in the global day. Key benchmark indices in China, Japan and Taiwan moved up by 0.08 per cent to 0.79 per cent while indices in Hong Kong, Taiwan and South Korea dropped 0.02 per cent to 0.65 per cent.
European markets were also trading narrowly mixed as indices in Germany and the UK declined by 0.14 per cent to 0.23 per cent while France CAC was quoted up by 0.06 per cent.
Jignesh Chaudhary, Head of Research, Veracity Broking Services said: "Local equities posted third daily gain in four. Investors are closely watching the every single move of government. Already some of the steps taken by the PM Narendra Modi have boosted investor confidence.
"It is expected that the new government will form business friendly economic policies which will remove the bottleneck and will eventually help the economy to grow."
Overall, 23 out of 30 Sensex-based counters closed in the green while others finished in the red.
Sesa Sterlite was the top gainer with a rise of 6.50 per cent, followed by Hindalco 5.54 per cent, HUL 4.27 per cent, Tata Power 3.64 per cent, Tata Motors 3.11 per cent, Gail 2.77 per cent, ONGC 2.01 per cent, Wipro 1.88 per cent, Hero MotoCorp 1.74 per cent, Infosys 1.48 per cent, Axis Bank 1.16 per cent and RIL 0.90 per cent.
However, M&M declined 1.46 per cent, HDFC Bank 1.43 per cent, Cipla 0.87 per cent and Dr Reddy's Lab 0.74 per cent.
Smallcap and midcap indices logged their fresh 52-week highs today, gaining 1.42 per cent and 1.01 per cent respectively.
"Participants are ready to give higher valuations to beaten down mid-cap stocks, which are perceived to witness relatively higher growth, once the recovery sets in," said Dipen Shah, Head- PCG Research, Kotak Securities.
Total market breadth remained positive as 2,153 stocks closed with gains while 869 finished with losses. Total turnover improved further to Rs 4,906.75 crore from Rs 4,467.78 crore yesterday.