The 30-share Sensex ended at 18,835.77 up 131.24 points or 0.7% and the 50-share Nifty ended at 5,682.55 up by 40.95 points or 0.73%.
The Sensex and the Nifty reached an intra-day high of 18,874 levels and 5,692 mark, respectively.
Global risk appetite also improved after Germany's retail sales advanced countering concern over Europe’s debt crisis.
In Asia, Japan's Nikkei share average fell to a one-week closing low on Thursday as concerns about Italy's funding costs and the rescue deal for Cyprus prompted investors to take profits on exporters.
The Nikkei closed 1.3% lower at 12,335.96, staying below its five-day moving average of 12,437.27and moving away from a 4-1/2-year high of 12,650.26 struck last Thursday.
European markets traded higher with CAC, DAX and FTSE gaining between 0.1-0.2%.
Back home, for the first 11 months of the current financial year, the Centre's fiscal deficit touched 97.4% of revised estimate (RE) for 2012-13, official data showed today.
In absolute terms, the fiscal deficit stood at Rs 5.07 lakh crore against Rs 5.21 lakh crore estimated in the RE, the data provided by the Controller General of Accounts revealed.
On the sectoral front, BSE Metal, Capital Goods, Consumer Durable, Bankex and PSU indices gained by 2-3%. However, BSE Auto index was down nearly 1%.
The main gainers on the Sensex were Hindalco, GAIL, ONGC, Sterlite, Coal India, DRL, Infosys, Tata Power and L&T, all surging between 1-4%.
Shares of automobile stocks were under pressure with many frontline stocks trading lower by up to 3%
Sensex ends at 4-month low on political turmoil
Bourses to extend pre-open call auction from April
Rupee up 7 paise at 54.29 Vs USD
Why DON'T India's rich do MORE for charity?
Salaries soar: India's HIGHEST paid CEOs