``The US Senate move to give President Bill Clinton authority to waive temporarily economic sanctions against India and Pakistan was a major factor which boosted the sentiment. The FII buying interest in Indian stocks will increase now,'' said a broker. Sensex (BSE sensitive index) surged from the session's low of 3356.72 to finish at 3488.77 with a sizeable gain of 123.05 points. The NSE-50 index (Nifty) shot up by 32.65 points to 1004.05 from 971.40 on the National Stock Exchange (NSE).

According to a FII fund manager, India will benefit from the US decision to reverse course on Wednesday, lifting some agricultural sanctions against India and Pakistan and taking a major steptoward withholding implementation of most sanctions against the two countries. As a result, prices of most of the multinational shares showed remarkable recovery following good buying by FIIs. Morgan Stanley, Capital and Shrodders made major purchases.

Software stocks were once again in focus and notched up huge volumes on the Bombay Stock Exchange after the government unveiled tax incentives for the information technology sector. Shares of software companies like Pentafour Software, BFL, Satyam Computers, Infosys and NIIT attracted heavy speculative support.

Market circles also attributed the rise in the domestic markets to strengthening of other Asian stock markets and likelihood of a rise in the value of the rupee against the dollar. The rupee gained by nearly four paise at 42.55/56 against the dollar at the inter-bank foreign exchange market.Several brokers expect the Sensex to stabilise at around 3,500 levels in the near future. ``If the sanctions are not lifted then the world bank aided projects ofpower and coal sectors will get stalled again leading to back turn in the markets again and if they are lifted then markets will move northwards,'' said an official of Shailesh Merchant Brokers.

Software companies hit the upper limit of the circuit or were near it. Satyam Computer gained 7.17 per cent to close at Rs 548.75 with volmes of 34.9 lakh shares, Pentafour Software hit the circuit at Rs 811.50, NIIT gained 3.3 per cent to close at Rs 1,536.50, BFL hit the circuit at Rs 446.25 from its previous close, Digital Equipment at Rs 150.70 and DSQ Software at Rs 262.90. The other scrips which hit the circuit breaker were Bhel, MTNL, Rolta, Zee Telefilms, Cadbury, Essel Packaging and Orient Information.