The BSE barometer, which had lost over 139 points in its previous session, ended 329.73 points, or 3.80 per cent, higher at 9,004.08.

On across the board buying, all the sectoral indices on BSE ended with gains in the range of up to 5.70 per cent.

The wide-based National Stock Exchange Nifty also gained 92.80 points, or 3.46 per cent at 2,771.35.

Marketmen said covering-up of short positions by speculators ahead of January expiry in the derivatives segment also supported the rally.

They further said that sentiments were buoyed after the RBI predicted in its credit policy that inflation will ease below three per cent by this fiscal-end. Through the RBI kept the key rates unchanged, its projection of lower inflation boosted optimism that interest rates will be cut to encourage growth, spurring buying in banking sector stocks.

Encouraging third quarter earnings by the country's top lenders State Bank of India and ICICI Bank also influenced the trading sentiment, traders said.