According to brokers, FII purchases at select index based counters helped the index rebound in a strong manner. FIIs were reportedly buyers at the counters of SBI, Telco, Reliance, MTNL, Tata Power, Arvind Mills, Tisco and ACC.

"Institutional activity has picked up and the undertone of the market is bullish," said the director of Dalal & Broacha, Nailesh Dalal. "The economy is showing good signs of recovery. Under these conditions Kargil problem was the only hitch. Now with the problem more or less under control, the market will recover smartly," explained Dalal.

Interestingly, the huge buy orders routed by the Offshore funds in the GDR markets, according to an institutional broker provides an indication of FII interest in the market. OnThursday, FIIs were net buyers to the tune of Rs 13 crore.

"The firm undertone of the domestic markets is driven largely by the GDRs with the premiums of Indian paper now expanding to the local markets," explained the director of an FII brokerage firm.

Brokers further explained that since Reliance GDR was quoting at a premium of over 22 per cent at the overseas markets, it made business sense for the fund managers to sell in the GDR markets and buy in the domestic markets.

Interestingly, the steep recovery registered at the counters of Reliance and MTNL in the domestic markets has been attributed to the game plan of the arbitrageurs.

While at the GDR markets, Reliance was traded at $ 10.4, at the domestic markets the scrip shot up to touch an intra-day's high of Rs 185.50 before closing at Rs 184.30 on the BSE. The counter clocked a phenomenal volume of over 2.01 crore shares between the two local bourses.

Similarly, MTNL also recovered sharply by over 3 per cent to close at Rs 177.50. Otherpivotals like ACC, Ashok Leyland, ICICI and ITC also followed suit with the FIIs now routing their purchase orders through the domestic bourses.

Pharma counters once again lost steam with the domestic mutual funds and players booking profits at every stage of improvement. Stocks like Pfizer, German Remedies, Ranbaxy Labs, Rhone Poulenc and Dr Reddy's Laboratories declined by over three per cent on account of the huge bouts of sales pressed during mid session. However, Alfa Laval moved against the tide to register a gain of Rs 10.45.

Hero Honda was the star performer of the day with the stock breaching the crucial barrier of Rs 1,000 to close at Rs 1,038.50 on the BSE. However, on the NSE, the stock closed with a discount of Rs 8, at Rs 1,030 registering a net gain of 3.51 per cent. The counter clocked a huge volume of over 42,000 shares.

Power stocks once again gained favour among fund managers with Tata Hydro, Tata Power and Andhra Valley hitting the upper limit of the price band. Similarly, othergainers for the day were Indian Rayon, Grasim, Tisco, Bata India, Kirloskar Cummins, ITW Signode and Escorts.

The trading session on the BSE was extended upto 4 pm on account of the technical snag at the exchange.