Banking stocks led the surge with most of the private banks rising nearly 3-4 per cent.
Finance Minister P. Chidambaram had yesterday announced in the interim budget that the government will maintain fiscal deficit by containing expenditure. He had also announced cut in excise duty for the auto sector and some sops for other industries.
Sentiments were also boosted by firm global stocks as well as trend in capital inflows, with data showing FIIs bought shares worth Rs 522.82 crore yesterday as per the provisional figures issued by the stock exchanges.
Auto stocks continue to rise with Maruti up 2.57 per cent and Tata Motors rising 1.24 per cent, while infra heavy-weight L&T gained 1.91 per cent.
The market opened lower amid mixed Asian cues and choppiness and reversed the losses during the morning trade. It extended the surge during the afternoon trade, but trimmed gains before ending in the green.
The 50-share Nifty hovered between a high of 6,141.70 and a low of 6,066.80, before closing at 6,127.10, up 53.80 points, or 0.89 per cent, from the previous close.
Other major gainers were Jindal Steel, Kotak Bank, Axis Bank, HDFC, Tata Power, ICICI Bank, Indusind Bank, JP Associates.
GAIL, ITC, HCL Tech and Wipro were some of the key losers.
Turnover in the cash segment rose to Rs 8,957.67 crore from Rs 8,230.85 crore yesterday. A total of 4,488.42 lakh shares changed hands in 48,69,378 trades. Market capitalisation stood at Rs 66,02,267 crore.