Overnight, US stocks hit a four-and-a-half-year high after the European Central Bank announced that there will be no limits to the amount of bond purchases it can make. The new bond-buying program will enable the ECB to buy government bonds with maturities of one to three years.
The program is intended to keep the short-term borrowing rates of countries like Italy and Spain at manageable levels, giving them time to enact debt reduction measures and economic reforms.
Asian stock markets rallied Friday. Chinese Shanghai Shenzen traded 4.5 per cent higher while Japan's Nikkei ended 2.2 per cent higher. Eurozone stocks, which had hit a six-month high on Thursday, opened higher today.
"With the ECB going out and delivering, there are expectations that this rally will continue," Abhay Laijawala, MD & head of research at Deutsche Equities said.
Commodity stocks were the biggest gainers as the liquidity push is expected to drive prices up. The BSE metal index was up 2.3 per cent. On the Nifty, Tata Steel was the top gainer, rising over 4.5 per cent. Hindalco, Sterlite Industries, and Sesa Goa were among the top gainers.
Banking stocks also witnessed strong buying interest. Private lender ICICI Bank traded 4 per cent higher.
Amid all-round buying, shares in oil marketing firms witnessed some selling pressure. BPCL was the top loser on the 50-share Nifty, falling 2 per cent. HPCL and IOC also traded lower.
The sharp selling in these firms came after Petroleum Minister S. Jaipal Reddy said there was no immediate plan to increase fuel prices. The announcement left investors disappointed, who were expecting a price hike as early as today.
47 of the 50 stocks on the Nifty traded with gains indicating bullish sentiments on the Street. The market breadth was strong with 84 per cent stocks rising on the broader BSE 500 index.
(With inputs from AP)