The Indian stock markets ended nearly 1 percent up on optimism that the Reserve Bank of India will give an impetus to the sagging economic growth by easing interest rates in the first quarter of 2013.
The Sensex closed at 19,417.46, up 0.84 percent and the Nifty 5,905.60, up 0.85 percent.
Bank shares lead the rise on as the central bank has announced an open market bond purchase auction to infuse up to Rs 8,000 crore into the banking system.
The step is expected ease the tightness in the systemic liquidity.
Another booster dose to the market sentiment was the export sops announced by the government.
As part of the exports sops, the government has extended the interest rate subsidy for some exporters until 2014.
As part of the package, the government extended a 2-percentage-point interest subsidy on rupee-denominated export loans for labour-intensive and small-scale industries by one year to the end of March 2014 to cushion the impact of weak demand in developed economies, Reuters reported.
Commerce and Industry Minister Anand Sharma also extended the interest subsidy to the engineering sector, which has been the biggest contributor to Indian exports. However, he did not quantify the monetary value of these incentives.
Stocks in news
Shares of BHEL and Larsen & Toubro rose 1.1 percent and 2.2 percent after the government announced the interest rate subvention.
ICICI Bank and State bank of India 2.4 percent and 1.8 percent on hopes of an improvement in systemic liquidity after the RBI's OMO.
Kingfisher Airlines shares declined 0.4 percent after Aviation Minister Ajit Singh said the revival plan submitted to the aviation regulator by the company is not backed by a clear funding proposal.