The Nifty closed at more than 2-month high after the Reserve Bank cut CRR -- the money banks park with the central bank -- rates by 50 bps on heavy volumes.
Index heavyweights L&T, SBI, ICICI Bank and Reliance Industries were the main drivers on Tuesday.
The Sensex rose 244.04 points, to close at 16,995.77 - a tad below the 17,000 mark. The Nifty moved up 81.10 points to 5,127.35 - at its highest level since November 14, 2011.
However, experts feel the market may soon see a correction as it had rallied 10% since the start of 2012.
Ambareesh Baliga, COO of Way2Wealth believes the rally may not last too long. "I think we are more or less close to the top and the correction may set in anytime,' he adds. Although Baliga is cautious on the market now, he says it will only be a correction and the market will not re-enter the bear phase.
It was a solid boost to the market today, giving confidence to the investors. RBI's move signals that it has shifted its focus from inflation to reviving growth. It has injected Rs 32,000 crore liquidity into the banking system by cutting CRR while kept policy rates unchanged.