The Sensex rose by 777 points at close on Tuesday for its biggest points-wise gains since May 2009.
Nifty also reclaimed 7,200 points to surge at 235.25, or 3.37 per cent, to finish the day.
The gains in the benchmark indices were led by buying in interest-rate sensitive stocks as the pledge by the FM Arun Jaitley to meet the fiscal deficit target for FY16 raised expectations of a rate cut by the Reserve Bank of India in the near-future.
Positive global cues made sure the domestic market end up as the best performing Asian market on the day.
The broader market traded in line with the benchmark indices. Smallcap and BSE midcap rose by 3.23 and 3.04 each.