Snapping its five-day losing run, the 30-share index closed in on the 21,000 mark on the back of massive buying in rate-sensitive banking, realty, auto and consumer durable shares. Investor wealth zoomed by around Rs 1 lakh crore on the BSE as overall 1,294 stocks closed with gains.
The BSE Sensex, which had lost 325 points in the past five sessions, shot up by 358.73 points, or 1.74 percent to 20,929.01 after RBI Governor Raghuram Rajan announced the second quarter review of monetary policy 2013-14.
Market participants viewed the RBI's move to increase the liquidity provided through term repos of 7-day and 14-day tenor from 0.25 percent of Net Demand and Time Liability (NDTL) of banking system to 0.5 percent as a big positive.
The Central Bank expectedly raised repo rate by 25 bps to 7.75 percent while continuing to roll back MSF rate by 25 bps to 8.75 percent on account of normalised forex situation.
"There was fear in the last few days that the RBI might go on a over-drive in its fight against inflation by hiking repo rate by 50 bps as against the consensus 25 bps hike.

After the policy was announced, there was a relief on this front as well," said Rikesh Parikh, VP - Institution Corporate Broking, Motilal Oswal Securities.
The 50-scrip National Stock Exchange index Nifty jumped up by 119.80 points, or 1.96 percent to 6,220.90. Also, SX40 index, the flagship index of MCX-SX, closed 195.44 points or 1.60 percent higher at 12,445.13.
Brokers said a better trend in the Asian region and higher opening in Europe further supported the sentiment. In Asia, the Sensex and the Nifty returned the best daily gains.
Sectorally, the BSE Banking index rose to nearly 1-month high by surging 4.35 percent led by ICICI, SBI and HDFC Bank.
The Realty sector was second best performer by rising 2.44 percent, followed by Auto sector (2.43 pc) as Maruti Suzuki spurted by 8.2 percent after profit nearly tripled.


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