Key benchmark indices on Thursday closed the session on a strong note as equities across the world rose after the US Federal Reserve in its monetary policy review on Wednesday decided to maintain stimulus to the US economy through monthly bond purchases of $85 billion.

The Fed Chairman Ben Bernanke decided against tapering its bond purchases for now saying that economic data since June did not support a reduction in buys.

The BSE Sensex jumped 684.48 points or 3.43 percent to settle at 20,646.64 points, which is its highest closing level since November 10, 2010.

The index surged 777.53 points at the day's high in late trade and gained 385.14 points at the day's low in opening trade.

Consequently, stocks and currencies in emerging markets including India led the Asian market rally this morning. 

Bank stocks were the star performers of the day, on hopes that the Reserve Bank of India (RBI) would ease some of the liquidity curbs it had placed in July to protect the rupee. 

YES Bank was the biggest gainer, which rose 23 per cent, while shares of IndusInd Bank and Kotak Mahindra Bank rose 5 and 8 per cent respectively.  It may be noted that these bank stocks had fallen steepest in the last month because of the RBI’s  measures which pushed up cost of wholesale funds.

Meanwhile, the rupee also firmed up against the dollar and close with a gain of 152 paise to 61.86 against the dollar.

Analyst at financial services firm Kotak Securities, Dipen Shah said: “There was relief among emerging markets as threat about immediate FII outflows receded.”

He added, “Indian markets also rose on reduced threats of foreign money and in anticipation of a favourable policy from the new RBI Governor.”