The Bombay Stock Exchange barometer closed higher by 340.44 points, or 2.11 per cent, at 16,498.72 points.

The index has risen by over 750 points in the last three sessions.

The wide-based National Stock Exchange index Nifty spurted by 102.25 points to close at 4,898.40 points.

Brokers said markets posted smart gains on a strong rally in most-weighted Reliance Industries and banking sector stocks after the government's move to push financial reforms.

Prime Minister Manmohan Singh, yesterday, said the government would steadily pursue reforms to feed economic growth, while withdrawing the fiscal stimulus by next year.

Reliance Industries regained Rs 2,000 level rising by 3.46 per cent to close at Rs 2,024.55.

State Bank of India shot up by 5.19 per cent to Rs 2,318.55, ICICI Bank by 4.72 per cent to Rs 888.80 and HDFC Bank by 4.06 per cent to Rs 1,706.50.

Strong global cues and a weakening dollar also influenced the trading sentiment, brokers said.