The BJP's landslide victory in Uttar Pradesh and Uttarakhand worked wonders for the market today as Sensex soared 496.40 points, or 1.71 percent, at 29,442.63 -- a level last seen on March 5, 2015 -- while the Nifty hit an all-time of 9,087.
At one point, the 30-share BSE index rallied 615.70 points to hit a high of 29,561.93.
The Nifty settled higher by 152.45 points, or 1.71 percent, at a life-time high of 9,087, surpassing its previous record of 8,996.25 on March 3, 2015.
The rupee flexed muscles, climbing to a 16-month high of 65.82, a huge gain of 78 paise.
Despite a spike in February WPI inflation to 6.55 percent, investors set aside all their caution and pumped in more money on hopes that the assembly poll win will make the government push through bold reforms.
Markets were shut yesterday on account of Holi. Sentiment turned extremely bullish as the BJP's huge victory in Uttar Pradesh and Uttarakhand is seen as giving a fillip to the government's reform agenda, which triggered a flurry of buying by participants, including foreign and domestic institutional investors.
"The market started the day with a gap-up opening, triggered by the strong performance of the BJP in the recently held five state elections in India," said Karthikraj Lakshmanan, Senior Fund Manager – Equities, BNP Paribas Mutual Fund.
ICICI Bank was the best performer with 5.99 percent gain. Support also came in from Hindustan Unilever (4.54 percent), L&T (4.40 percent), HDFC Ltd (3.69 percent), Asian Paints (3.51 percent), Maruti Suzuki (3.02 percent) and Adani Ports (2.92 percent).
Sun Pharma rose 3.61 percent after the US health regulator proposed to lift the import alert on the company's Mohali (Punjab) manufacturing plant.
Foreign funds net purchased shares Rs 412.14 crore last Friday, as per the provisional figures. Expectations of more liquidity in bourses had a positive impact, traders said.
The BSE capital goods index had a field day, rising 3.06 percent, followed by realty 2.57 percent, consumer durables 2.40 percent, bank 1.93 percent and FMCG 1.60 percent.
With the buying activity gathering momentum, second-line stocks continued their upward sprint. The BSE mid-cap and small-cap indices rose 1.43 percent and 1.19 percent, respectively.
Other Asian markets ended mixed while European shares remained indecisive in early session as investors waited for the start of the Federal Reserve's policy meeting.
A good 26 Sensex stocks ended in the green while 5 others turned red.
"Path for the Nifty will be driven by earnings growth trajectory in 2017-18, GST implementation and its teething issues on corporates on the domestic side. Global factors that matter are US Fed's stance on interest rates and the dollar's behaviour against emerging markets currencies," said Rakesh Tarway, Head of Research, Reliance Securities.
The market breadth turned positive as 1,704 shares ended higher, 1,125 lower while 216 ruled steady. The total turnover on BSE read Rs 4,677.92 crore, down from Rs 7,509.23 crore previously.
In rest of Asia, Shanghai Composite and Hong Kong's Hang Seng were up while Japan's Nikkei dropped in early trade today as investors look ahead to the Federal Reserve's policy meeting this week.
The US Dow Jones Industrial Average lost 0.10 per cent yesterday.
(With PTI inputs)