Consumption stocks spurted after the weather office said monsoon rains will be normal in August and September, boosting growth prospects of the rural economy.
The BSE Sensex rebounded by 391 points to close at 37,556.16, while the broader NSE Nifty jumped 116.10 points to finish at a new lifetime high of 11,360.80.
Recently-battered bank and financial services shares saw renewed buying interest.
Strong earnings and upbeat services PMI data further buoyed sentiment, brokers said.
The 30-share Sensex stayed in the green throughout the session and hit the day’s high of 37,582.27 on a flurry of buying. It finally ended at 37,556.16, up 391 points, or 1.05 percent.
The gauge had lost 441.42 points in the previous two sessions after the RBI hiked the policy rate, making loans costlier for consumers, amid an escalation in the Sino-US trade conflict.
The NSE Nifty spurted 116.10 points, or 1.03 percent, to end at a new record of 11,360.80. It surpassed its previous closing high of 11,356.50 hit on July 31.
It was the second straight week of gains for the benchmarks. The Sensex recorded a rise of 219.31 points, or 0.59 percent, while the Nifty gained 82.45 points, or 0.73 percent, during the week.
Meanwhile, foreign portfolio investors (FPIs) sold shares worth a net of Rs 639.87 crore, while domestic institutional investors (DIIs) also sold equities to the tune Rs 340.30 crore yesterday, provisional data showed.
“Market turned to positive terrain after two days of selling as IMD’s prediction of favourable distribution of rainfall and outperformance in banking stocks supported the rally.
“Further, consecutive growth in India’s service PMI data and moderation in oil price supported the positive momentum in the market.
“On the other side, global market also recovered from yesterday’s fall and investors are awaiting US job data to get clues on the pace of US Fed interest rate hikes,” said Vinod Nair, Head of Research, Geojit Financial Services.
India’s services sector activity remained in the growth territory for the second consecutive month in July, as business activity witnessed the strongest growth since October 2016, a monthly survey showed.
The seasonally adjusted Nikkei India Services Business Activity Index rose from 52.6 in June to 54.2 in July.
Shares of ONGC rose 0.48 percent, a day after the firm reported a 58.1 percent jump in net profit for the June quarter.
Axis Bank was the top gainer in the Sensex pack, surging 5.17 percent, followed by Vedanta at 3.60 percent.
Other prominent gainers included Yes Bank 2.96 percent, ICICI Bank 2.33 percent, Kotak Bank 2.20 percent, HDFC 2.16 percent, Coal India 1.94 percent, ITC 1.57 percent, SBI 1.56 percent and TCS 1.37 percent.
However, Tata Motors fell 0.84 percent, Hero MotoCorp 0.71 percent, Asian Paints 0.50 percent, HDFC Bank 0.39 percent, Wipro 0.32 percent and IndusInd Bank 0.28 percent.
Jet Airways nosedived 7 percent following reports of the airline’s financial woes.
All sectoral indices ended in the green, led by BSE bankex 1.64 percent, consumer durables 1.52 percent, metal 1.50 percent, finance 1.44 percent, healthcare 1.13 percent, PSU 0.92 percent, FMCG 0.80 percent, teck 0.74 percent and IT 0.74 percent.
The broader markets too displayed a similar trend as investors accumulated stocks available at attractive levels. The BSE small-cap index advanced 1.16 percent, while the mid-cap gauge gained 0.93 percent.
Globally, Asian stocks were mixed, while the mood was cautious amid the US-China trade conflict.
Japan’s Nikkei inched up 0.06 percent and Taiwan rose 0.76 percent, while Hong Kong’s Hang Seng dipped 0.14 percent and Shanghai Composite Index shed 1 percent.
In the Eurozone, Paris CAC 40 and Frankfurt’s DAX were up by 0.32 percent and 0.49 percent, respectively, in early deals. London’s FTSE too jumped 0.64 percent.