Marketmen were enthused by the growing support to India from the international community, especially the US. ``With US President Bill Clinton issuing a stern warning to Pakistan and pro-India signals from China, a perception is gaining ground that Pakistan will now be forced to recall its army regulars and insurgents from the Kargil region. There was also a rumour that Pakistan had begun to reduce its troop buildup along the border. If there is no further unpleasant news from the border, the market will see a straight run to 4300-level. The market is expecting a ceasefire on theborder in the next few days,'' said a broker.

The buying spree was also aided by reports that the US Senate has formally ratified lifting of sanctions against India. The US move will help in normalising trade relations between the two countries. ``The sentiment got a strong boost by the United States' positive reaction towards India's action against the Pakistan sponsored intruders in the Kargil sector,'' said a fund manager.

With a host of good news coming in favour of India, FIIs were active after mid-session and bought key scrips like SBI, Telco, Hindustan Lever, ITC and others. Of the 148 traded specified scrips, 110 advanced while 37 declined and one remained steady.

Sensex (BSE sensitive index) opened at 3922.71, fell below the 3900 mark and touched the day's low 3876.56. However, sensex recovered smartly to touch the day's high of 4031.00 before closing at 4021.40 with a sizeable gain of 119.67 points from the previous close of 3901.73. The BSE-100 index gained sharply by 39.66 points to 1728.94from the previous close of 1689.28.

The rally was led by banking giant State Bank of India on rumours of an impending cut in cash reserve ratio. However, the cut in CRR could not be confirmed till late in the evening. With SBI showing the way, other pivotals including Hindustan Lever perked up, triggering short-covering in some counters. SBI shot up by Rs 18.70 to Rs 252.90 on brisk buying and the scrip clocked a turnover of Rs 180.92 crore of the total volume of business of Rs 1583.99 crore.

Reliance gained Rs 9.50 at Rs 183, Satyam Computer Rs 19.60 at Rs 1185, Larsen Rs 7.85 at Rs 307.85, Ranbaxy Rs 39.90 at Rs 593.40, Hindustan Lever Rs 94 at Rs 2315, Telco Rs 13.50 at Rs 191.50 and Tisco Rs 5.40 at Rs 132.50 on buying support.

On the foreign exchange market, the rupee staged a smart rally on dollar selling by some banks. Opening at 43.29/30, the rupee found support as the State Bank of India (SBI) sold heavily in the opening session. The Indian unit strengthened during the day and ended at 43.13.It had rallied to 43.15 by around 1330 hrs and on lack of demand and adequate supply ended 20 paise higher from 43.33 in the last trading session.

``US president Bill Clinton's statement that Pakistan must stop its infiltration was seen as diffusing the tension on the border. Most corporates with exposure had covered their positions on Tuesday, but after Clinton's statement, corporate demand dipped further. SBI was seen selling dollars and many other banks cut long-dollar positions," said a dealer, adding that news of the Indian army's capture of key positions in the last two days made marketmen to believe that the Kargil conflict may end soon and boost the sentiment further.

The rupee had crashed by 16 paise on Tuesday and by 10 paise on Monday. Corporates had been buying dollars heavily fearing escalation of tension in the Indo-Pak border. If the current situation continues in the next a few days, the rupee might strengthen above the 43 level in the coming days, dealers said.