Leading brokers said the market sentiment was boosted by reports that Pakistan had agreed to take "concrete steps" for the restoration of the Line of Control (LoC) in Kashmir in response to Clinton's call for "immediate cessation" of the hostilities with India. Simultaneously, India's capture of key Tiger Hills in Kargil also boosted the sentiment. ``India's position is quite strong... at the same time, Pakistan is under pressureboth militarily and diplomatically,'' said an NSE dealer.

Sensex (BSE sensitive index) started firm at 4261.02 and moved upwards to close at the yearly high of 4306.40 as against last Friday's close of 4194.55, with a sizeable gain of 111.85 points. The BSE-100 index also rose by 53.72 points to close at the 52-week high of 1854.23 from previous close of 1800.51.

``If Pakistan withdraws from the Indian soil following the US pressure, the border conflict between the two countries will end. One will have to wait and see whether this actually materialises or not,'' fund managers said. The smart rally was also due to short-covering by operators in view of end-account considerations on the National Stock Exchange (NSE) on Tuesday and brisk purchases in several counters on the BSE. FIIs reportedly made all-round purchases focussing their attention on software and pharmaceutical scrips. However, domestic institutions booked profits in scrips like Reliance, BPL, Bajaj Auto, NIIT and some others.

In thespecified group, 25 scrips including index-based shares like BHEL, Colgate, Grasim, Tisco and Tata Power hit the circuit filter after exhausting the daily limit. Several shares in B1 and B2 groups also hit the upper price band. Of the 147 traded specified shares, 140 scored sharp advances and only 7 including index scrips like Tata Chem, NIIT and Bajaj Auto showed losses.

Pentafour Software remained the most active share with a turnover of Rs 210.43 crore of the total volume of business of Rs 1797.22 crore, sharply up from last Friday's turnover of Rs 1520.58 crore. Pentafour Software spurted by Rs 52 to Rs 1209, SBI by Rs 5.60 to Rs 258.50, Ranbaxy by Rs 19.80 to Rs 677, Reliance by Rs 6.10 to Rs 186.90, Satyam Computer by Rs 22 to Rs 1275, Hindustan Lever by Rs 26 to Rs 2450, ITC by Rs 12 to Rs 1105, Telco by Rs 14.85 to Rs 220.85 and Tisco by Rs 11.85 to Rs 160.35 on brisk buying.

Meanwhile, the Indian rupee appreciated by 16 paise against the US greenback as the prospects of an early end to the borderconflict brightened. There was virtually no demand for dollars in the forex market. The Indian currency opened strong on sustained offloading of dollars by banks and corporates due to encouraging reports on settlement of border crisis at the interbank foreign exchange (forex) market today. Opening higher at 43.29/39, which itself was the day's low, the rupee continued its rally as the market virtually turned to a dollar seller's market.

Corporates and banks offloaded their dollar position expecting further rise of the rupee's value in the wake of the encouraging Indo-Pak development, while importers preferred to stay away, awaiting further appreciation of the Indian currency, dealers said. The Indian unit closed sharply higher at 43.23/24 as compared to 43.39/40 of the previous day.