The BSE Sensex jumped nearly 250 points to reclaim the 18,500 mark while the broader Nifty bounced back above the key 5,600 mark Friday. The strong gains came on the back of positive global cues and the government's notification allowing foreign investment in multi-brand retail, aviation, and broadcast on Thursday. The rupee, too, saw gains and traded at 54.08 to the dollar.
The government implemented its reforms decisions taken last week despite widespread political opposition, which has sent a positive signal to markets. There are hopes that more reform steps may be taken next week.
"There is no need to press the panic button as far as the domestic polity is concern... Markets may rise to 5,650 or 5,900 on account of global liquidity," Mehraboon Irani of Nirmal Bang Securities told NDTV Profit.
Strong buying was seen in aviation and retail stocks. Debt laden Kingfisher Airlines surged 4.5 per cent while SpiceJet traded with over 2.5 per cent gains. Pantaloon Retail shares jumped over 6 per cent.
All groups of stocks traded higher. Banks and capital goods stocks jumped nearly 2 per cent. On the Nifty, 48 of the 50 stocks traded higher.
Reliance Infra was the top Nifty gainer, up 3.5 per cent. Private lender Axis Bank and heavy equipment maker BHEL also traded with 3-3.5 per cent gains.
(With inputs from Thomson Reuters)