Mumbai (Agencies): In a strong pull-back rally, the benchmark Sensex spurted for the second day, closing over 358 points up at 18,449.31 -- biggest single day gain this year -- on across-the-board buying led by realty, capital goods, metal and banking segments.

Investors shrugged off inflation and high interest rate worries on indications from US and Europe that global economic recovery was taking hold.

Marketmen said the rally was triggered by hectic short-coverings at lower levels amid domestic funds buying despite a spurt in food inflation and sustained capital outflows in the absence of firm direction from overseas markets.

The Bombay Stock Exchange 30-share barometer, few minutes after the onset of business, touched a low of 18,064.61 before bouncing back to settle the day at 18,449.31, a sharp rise of 358.69 points or 1.98 per cent. Yesterday, it was up by 68.40 points or 0.38 per cent.

Similarly, the NSE 50-issue Nifty shot up 94.75 points or 1.74 per cent to 5,526.75.

Smart rise in heavyweights like RIL, L&T, ICICI Bank, SBI, Bharti Airtel, Tata Motors, HDFC Bank, Infosys Tech, Hindalco, BHEL, HDFC, Tata Steel and DLF contributed to the Sensex rise enormously.

Finance Minister Pranab Mukherjee on Wednesday said that stock markets had seen volatility over the past few days due to selling pressure from Foreign Institutional Investors
(FIIs) but the government expected 8.5 per cent economic growth this fiscal.

Investors said US manufacturing data showed unexpected acceleration in January, the fastest pace in more than six years, signalling that the global recovery might be taking a
strong hold.

European manufacturing too gained at the quickest pace in nine months, while UK production increased at a record pace in January.

Meanwhile, back home, food inflation soared to 17.05 per cent for the week ended January 22, rising for the second straight week, from 15.57 per cent in the preceding week – a major investor concern.

In Asia, besides Japan, which ended 0.25 per cent lower, China, Hong Kong, South Korea, Singapore and Taiwan markets were closed today for the Lunar New Year holidays.

European stocks were trading narrowly mixed with downward bias in afternoon deals due to lack of trigger from Wall Street yesterday and heightened tensions in Egypt.

All the 13 sectoral indices ended in the green between 3.93 per cent and 0.18 per cent. The BSE-Realty flared up by 3.93 per cent, the BSE-CG by 2.51 per cent, the BSE-Metal by
2.19 pct and the Bankex by 2.04 pct.

From the Sensex pack, 29 scrips closed with sharp to moderate gains while only Bajaj Auto ended in the red.

Major gainers were DLF (7.42 pc), Jaipra Asso (6.06 pc), Bharti Airtel (5.12 pc), Hindalco (4.62 pc), Tata Motors (4.08 pc), Larsen (3.72 pc), Rel Infra (3.08 pc), SBI (3.08 pc),
Hero Honda (2.79 pc), BHEL (2.59 pc), RIL (2.40 pc), ICICI Bank (2.13 pc), HDFC Bank (2.12 pc), Sterlite Ind (1.93 pc) and Tata Steel (1.89 pc), HUL (1.31 pc), HDFC (1.12 pc) and Inofsys Tech (0.98 pc).

The total market breadth continued to remain positive as 1,763 stocks settled with gains as against 1,037 that closed with losses on the BSE. The total turnover declined marginally to Rs 3,544.43 crore from Rs 3,595.50 crore on Wednesday.