The S&P BSE Sensex surged over 500 points and Nifty reclaimed its important psychological level of 11,200 led by buying interest in rate sensitive shares after the Reserve Bank of India kept repo rate unchanged at two-decade low of 4 per cent.
As of 1:04 pm, the Sensex was up 531 points at 38,194.23 and Nifty climbed 146 points to 11,248.
Governor Shaktikanta Das said the RBI's Monetary Policy Committee unanimously decided to keep the key rates unchanged and maintain an "accommodative" stance, for "as long as necessary to revive growth, mitigate the impact of COVID-19, while ensuring that inflation remains within the target going forward".
Meanwhile, the RBI Governor did not mention about the extension of loan moratorium announced in the wake of Covid-19 pandemic which led to a spike in banking shares. The banking index on NSE - Nifty Bank index - which turned flat ahead of the monetary policy decision, rose as much as 1.5 per cent after the decision.
Gold loan providers surged after the RBI decided to increase the permissible loan to value ratio (LTV) for gold loans to 90 per cent from 75 per cent earlier.
Meanwhile, select auto shares were witnessing a mild selling pressure.
Bajaj Finance was top Nifty gainer, the stock rose 2.5 per cent to Rs 3,343. Zee Entertainment, GAIL India, Tata Steel, HDFC Bank, HCL Technologies, TCS, Infosys, Kotak Mahindra Bank, ICICI Bank and ONGC also rose between 1.7-3 per cent each.
On the flipside, Eicher Motors, Shree Cements, Maruti Suzuki, Adani Ports and Bajaj Auto were among the notable losers.
Mid- and small-cap shares were also witnessing buying interest as Nifty Midcap 100 index rose 1 per cent and Nifty Smallcap 100 index advanced 0.75 per cent.
The overall market breadth was positive as 1,563 shares were advancing while 904 were declining on the BSE.