The Bombay Stock Exchange 30-share gauge resumed higher but quickly fell to a low of 18,997.82. Buying gathered pace soon after Finance Minister P Chidambaram tabled the Survey.
The key index finally settled at 19,152.41, a rise of by 0.72 per cent or 137.27 points -- the best gain since January 25.
Yesterday, it had tumbled to three-month lows as it lost 316.55 points hit by global woes and hike in freight rates.
The 50-issue CNX NSE Nifty also bounced back today by 35.55 points or 0.62 per cent to end at 5,796.90.
Shares from capital goods, realty, refinery, metal, FMCG, power and PSU sectors attracted buying while IT scrips suffered losses on profit-booking. Market breadth turned positive as 1,440 shares finished up while 1,359 ended down.
The Survey projected an optimistic growth rate of 6.1-6.7 per cent for the 2013-14 claiming that the downturn is more or less over and economy is looking up. It made a strong call for cutting subsidies and widening of tax base.
"Economic Survey for 2012-13 presented some positive highlights indicating economic recovery, which boosted the market sentiment, along with positive global cues," said Rakesh Goyal, Senior Vice President, Bonanza Portfolio Ltd.
Smart rise in heavyweights like ONGC, Bharti Airtel, RIL, M&M and HDFC supported the recovery, brokers said.
All eyes are now set on the Union Budget 2013-14 to be presented in the Parliament tomorrow. The upsurge was further supported by firming trend in the Asian region after the US Fed affirmation of its commitment to monetary stimulus, they added.
"We remain optimistic that the Finance Minister will deliver a reform-centric Budget addressing fiscal and current account deficits in the wake of sustained country downgrade scare. Attempts to revive the industry cycle, infrastructure and deepening corporate bond market are some measures likely to be taken up," said Amar Ambani, Head of Research, IIFL.
Asian stocks ended higher after US housing data and comments from US Federal Reserve chief Ben Bernanke lifted the mood in global markets. Key benchmark indices in China, Hong Kong, Singapore, Taiwan and South Korea rose by 0.20-0.87 per cent while Japan's Nikkei Average fell by 1.27 per cent.
European stock markets were trading slightly better in the morning trade as key indices in France, Germany and UK inched up by 0.08-0.16 per cent.
Back home, 22 scrips out of the 30-share Sensex ended up while only eight finished down. Major gainers from Sensex were Bharti Airtel (3.29 pc), L&T (3.16 pc), M&M (3.03 pc), ONGC (2.91 pc), Bajaj Auto (2.23 pc), BHEL (2.15 pc), Tata Steel (1.97 pc), NTPC (1.92 pc), ICICI Bank (1.75 pc), Jindal Steel (1.60 pc), ITC (1.57 pc) and Sterlite Ind. (1.42 pc).
However, Gail India dropped by 1.72 per cent, followed by Infosys (1.56 pc), Tata Motors (1.11 pc), Coal India (1.08 pc) and Hero MotoCorp (1.01 pc).
Among the sectoral indices, the BSE-CG rose by 2.41 per cent, followed by BSE-Realty (2.12 pc), BSE-Oil&Gas (1.17 pc), BSE-Metal (1.11 pc), BSE-FMCG (1.01 pc), BSE-power (1.04 pc) and BSE-PSU (1.03 pc).
The total turnover advanced further to Rs 2,106.87 crore from yesterday's level of Rs 1,959.90 crore.
Foreign Institutional Investors (FIIs), though having slowed down pace of their purchases recently, picked up shares worth Rs 74.68 crore yesterday as per provisional data from the stock exchanges.