Domestic Institutional Investors (DIIs) were net buyers as they bought shares worth nearly Rs 2,000 crore, while Foreign Portfolio Investment (FPIs) offloaded shares amounting Rs 1,300 crore, provisional data showed.

The index had risen by 728.73 points on January 15, 2015 after Reserve Bank effected a surprise 25-basis point rate cut, the first of the four policy cuts last year.

Today's rise is the second-biggest single-day gain logged during the tenure of current BJP-led NDA government since coming into power in May 2014.

"Finance Minister's hints on big banking reforms added more legs to the short covering seen on Friday, following a week-long sharp and sustained sell-off," said Anand James, Co Head Technical Research Desk at Geojit BNP Paribas.

Market mood changed for the better after Asia rebounded from recent weakness as fears over global economic slowdown eased and crude prices rallied. China's central bank alsofixed the  yuan higher as the nation returned from a week-long holiday.

The Sensex resumed higher at 23,223.43 and firmed up to 23,622.64 before settling at 23,554.12 points -- showing a rise of 568 points or 2.47 percent.

The 50-issue NSE Nifty after reclaiming 7,100, advanced to hit the day's high of 7,182.80 points, finally settling 182 points or 2.61 percent higher at 7,162.95. In a bloodbath, both the indexes had posted their worst weekly performance since July 2009 with the Sensex falling
1,631 points and Nifty down 508.15 points.

On macro front, the inflation based on Wholesale Price Index (WPI) for January was at (-)0.9 percent compared with (-)0.73 percent a month earlier.

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