The BSE Sensex rose more than 650 points led by gains in banking stocks after the U.S. Federal Reserve stunned markets and decided not to taper its asset-buying programme.
The BSE Sensex gained 3.4 percent, while the Nifty was higher 3.7 percent at 1355 IST.
The Fed said it would await evidence of stronger economic growth before adjusting the pace of its purchases, and Chairman Ben Bernanke said in a press conference that market expectations cannot dictate policy actions.
The NSE bank index gains XX percent on hopes that the RBI in its policy review on Friday, may ease some of emergency cash tightening steps it had initiated in mid-July.
Among large-cap banks, ICICI bank Ltd (ICBK.NS) gains 6.8 percent while HDFC Bank Ltd (HDBK.NS) is up 4.8 percent.
