The Sensex, which remained weak in the last two trading sessions, bounced back by 168.91 points at 9,634.74 as major banking stocks surged on expectations that the central bank may cut interest rates to boost growth. The key index touched the day's high of 9,695.59 and a low of 9,540.60 points.

Similarly, the 50-share National Stock Exchange index Nifty rose 55.30 points to 2,948.35. It moved between 2,969.75 and 2,896.85 points.

Trading sentiment turned bullish after inflation figures on Thursday showed a one-year low, prompting speculation that borrowing costs will be lowered as industrial output declined in December.

The market also propped up on hopes of fiscal incentives in the interim budget on Monday, earning index-heaviest Reliance Industries handsome gains.