The Sensex, which gained 840 points in the past four trading sessions, jumped another 205.92 points to 18,506.82 on reports that food inflation fell to a two-month low, easing concerns about sharp interest rate hike.

Food inflation fell for second time in a row to 11.05 per cent for the week ended February 5 from 13.07 per cent in the previous week.

The gauge, the world’s worst performer this year after Egypt, has lost 12 per cent from a November 5 record, as the Reserve Bank of India raised interest rates seven times within a year to curb inflation.

The broad-based National Stock Exchange index Nifty also rose by 64.75 points to 5,546.45, with stocks in interest sensitive sectors like bank, capital goods and auto recording handsome gains.

A firming trend in the Asian region and higher opening in Europe further supported the uptrend. Key indices in the Asian stock markets rose to a one-week high, as increased forecast for the US economic growth from the Federal Reserve, and improving earnings, bolstered investor confidence.

The capital goods index gained the most by rising 1.93 per cent to 13,396.16 followed by banking index by 1.50 per cent to 12,637.93.

HDFC Ltd, the largest mortgage company stocks spurted by 3.15 per cent to Rs 649.35 and its banking arm HDFC Bank by 4.15 per cent to Rs 2,183.80. Dena Bank rose 2.11 per cent to Rs 99.10 on reports the government plans to invest Rs 5.39 billion by the purchase of preferential shares.

The metal sector index rose by 0.70 per cent to 16,106.98 as Steel Authority of India, the second-largest producer, gained 1.75 per cent to Rs 166.05 after reports that the company may build a plant in Mongolia.

With the broad-based buying, the smallcap index rose by 0.94 per cent to 8,324.56 and midcap index by 0.91 per cent to 6,796.39.