Heavy institutional buying in banks and technology counters helped the Bombay Stock Exchange's benchmark index end at an over seven-month high, overcoming uncertainty on the outcome of the elections and weaker-than-expected industrial output data.

The Bombay Stock Exchange Sensitive Index, or Sensex, gained 4 per cent also because of speculation in some quarters that the Bharatiya Janata Party-led National Democratic Alliance may emerge the winner.

Banking stocks gained after outgoing Reserve Bank of India Deputy Governor Rakesh Mohan's statement yesterday that the country's banks, with a low level of bad loans, were not facing any problems as of now.

The Sensex closed the day at 12,158, up 475 points and the broader index S&P CNX Nifty of the National Stock Exchange rose 3.56 per cent or 126 points at 3,681. Other Asian markets closed with mixed results.

Strong buying support came from foreign as well as domestic institutional investors. Provisional figures from BSE show that FIIs bought stocks worth Rs 452 crore and domestic institutional investors were net buyers of Rs 177 crore.

Sanjay Sinha, chief executive officer of DBS Chola Mutual Fund, said: "The rally suggests that we would get a stable government and the focus would again shift to economy and growth."

Not everybody is so optimistic. Ambrish Baliga, head of equities at Mumbai-based Karvy Stock Broking, said high speculation fuelled today's rally. "Traders are now taking a blind bet on a particular political party. However, there is still high uncertainty and it's going to take days before a firm government is in place," he said.

Baliga said his firm is advising clients to book profits because it believes that the political uncertainty and a correction due in other world markets may give them time to buy later.

Housing Development Finance Corporation gained 7.66 per cent at Rs 1,841. Wipro was up 7.40 per cent at Rs 375. ICICI Bank was up 6.72 per cent at Rs 558 and Bharti Airtel was up 6.23 per cent at Rs 794. Heavyweight Reliance Industries was up 5.32 per cent at Rs 1,958.

Market breadth was positive, with 1,410 gainers and 1,101 losers, while 75 stocks were unchanged.