The 30-scrip S and P Sensex of the Bombay Stock Exchange (BSE) closed at 19,997.10 points, up 727.04 point or 3.77 percent from its previous close at 19,270.06 points.
The benchmark Sensex touched a high of 20,012.69 points and low of 19,444.66 points in the day's trade.
In May 18, 2009, the Sensex had made historic gains of 2,099.21 points or 17.24 percent after the United Progressive Alliance emerged victorious in the 2009 general elections.
In Tuesday's trade, the wider 50-scrip S and P CNX Nifty of the National Stock Exchange (NSE) also made gains. It rose by 216.35 points or 3.81 percent at 5,896.75 points.
The rupee soared to a two-week high of 64.17 against the dollar, a gain of 1.5 percent over Friday's close at 65.24 to the dollar. The rupee had lost almost 20 percent of its value from the start of the current fiscal and hit a record low of 68.85 against the US dollar last month.
The currency rose sharply after government data showed that the trade deficit narrowed in August which will help in curbing current account deficit (CAD), a major reason for the recent sharp depreciation of the rupee.
The trade deficit narrowed to USD 10.9 billion in August from USD 12.27 billion in the previous month on the back of higher exports and lower imports. Exports jumped by 12.97 percent to USD 26.13 billion and the imports declined by 0.68 percent to USD 37.05 billion.
Other major factor that affected market sentiments was the de-escalation in the Syrian crisis with Russian mediation.
"Heavy dose of short-covering on the back of receding risk of military intervention in Syria ... at the same time, positive vibes created by new RBI governor drove stocks upward," said Anindya Banerjee, currency analyst, Kotak Securities.
"Over the last few trading sessions, rupee continues to recover -- thanks to a broad-based buying of emerging market currencies against the US Dollar."
There was strong buying support in automobile, capital goods, fast moving consumer goods (FMCG), consumer durables and bank stocks.
The BSE automobile index surged 623.24 points, followed by capital goods index soared 409.20 points, FMCG index was up 344.20 points, consumer durables index was up 274.19 points and bank index was ruling 251 points higher.
Most of the 30 sensitive index were gainers in the day's trade. These include Tata Motors, up 9.88 percent at Rs.349.20; Bharti Airtel, up 8.15 percent at Rs.339.10; Hero MotoCorp, up 7.22 percent at Rs.2,068.30; Larsen and Toubro (L and T), up 7.11 percent at Rs.807.20; and Sesa Goa, up 6.30 percent at Rs.186.50.
The main losers were: Dr Reddys Lab, down 0.76 percent at Rs.2,266.50; State Bank of India (SBI), down 0.11 percent at Rs.1,631.45; and Tata Consultancy Services (TCS), down 0.08 percent at Rs.1,986.05.
Among the Asian markets, Japan's Nikkei closed 1.54 percent up, while Hong Kong's Hang Seng ended the day's trade 0.99 percent higher. China's Shanghai Composite Index rose 1.15 percent.
In Europe, London's FTSE 100 was trading 1.01 percent up, while Germany's DAX Index was higher by 1.98 percent. The French CAC 40 Index was 1.61 percent up.
--IANS (Posted on 10-09-2013)