Mumbai: RBI's decision to remain accommodative propelled market to an over 7-month high as the Sensex wrested back control of the crucial 27,000-mark at the close by surging more than 232 points.
Banking and realty stocks fired on all cylinders while global cues were positive.
In the second bi-monthly monetary policy meeting of this fiscal, RBI kept the repo rate unchanged at 6.50 percent and the cash reserve requirement at 4 percent.
Governor Raghuram Rajan cited higher upside risks to the inflation trajectory behind the move, but signalled that the central bank could cut rate provided strong monsoon rains dampen inflation and data are supportive.
Across the Atlantic, the Fed Chair said the central bank will not be raising short-term interest rates until there is more clarity about the health of the US economy and its outlook.
Right from the word go, the BSE Sensex was up and running as it advanced to hit the day's high of 27,082.63 after the market gave Reserve Bank of India's accommodative stance a thumbs-up.
The index finally settled higher by 232.22 points, or 0.87 percent, at 27,009.67 -- a level last seen on October 28 last year.
The NSE Nifty after shuttling between 8,294.95 and 8,216.40 ended at 8,266.45, up 65.40 points, or 0.80 percent.
The rupee firmed up against the dollar, which kept equities in a good shape.
The central bank also retained India's growth projection at 7.6 percent for 2016-17, refering to corporate profits and a surge in consumption.
The state-run SBI took the cake by surging 5.4 percent, followed by ICICI Bank 4.31 percent.
Other big movers were ITC, Sun Pharma, Hind Unilever, Tata Steel, L&T, Lupin, BHEL, ONGC and Adani Ports.
"Benchmark indices in India hit their highest level in 7 months today and closed the day with gains of nearly 1 percent. All the sectoral indices on NSE traded in the green, with banking, FMCG and financial services gaining more than 1 per cent," said Shreyash Devalkar, Fund Manager ? Equities, BNP Paribas Mutual Fund.
Asia and Europe remained in a positive frame as investors speculated that the Fed may delay next rate hike beyond July.
Of the 30-share Sensex pack, 25 showed up in the green.
The BSE realty index gained the most by climbing 1.70 percent followed by banking (1.63 percent), consumer durables (1.57 percent), FMCG (1.35 percent), metal (1.30 percent), capital goods (1.23 percent), and PSU (1.10 percent).
In broader markets, the BSE small-cap index surged 0.96 percent and the mid-cap 0.29 percent.
Foreign portfolio investors (FPIs) bought shares worth net Rs 28.80 crore yesterday, provisional data showed.
Japan's Nikkei rose 0.58 percent while China's Shanghai index was up 0.07 percent and Hong Kong's Hang Seng rose 1.42 percent. Europe was also higher in its early trade.