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Recovering from early losses, the benchmark BSE Sensex surged over 750 points from the session's low after the RBI surprised with a bigger-than-expected rate cut but late selling in healthcare and metal stocks trimmed gains and the index ended 161.82 points higher at 25,778.66.
Besides, the NSE Nifty recaptured the 7,800-mark by rising 47.60 points or 0.61 per cent to close at 7,843.30. Rupee strengthening against the dollar during the day also helped.
Shares of metal, healthcare, oil & gas and consumer durables, however, ended on the losing side. In a big boost to the economy and borrowers, Reserve Bank on Tuesday announced a 0.5 per cent cut in repo rates to 6.75 per cent.
The apex bank also hiked limits for FPI investment in government securities to 5 per cent of the outstanding stock by March 2018, a move that will bring in an additional Rs 1.2 lakh crore in G-sec.
The uptick was tempered by RBI's pessimistic stance on economy as it revised its real GDP forecast for 2015-16 to 7.4 per cent from earlier expectation of 7.6 per cent.
The BSE Sensex after taking off on a negative note slipped further to a low of 25,287.33. However, it rebounded on RBI's announcement and regained the 26,000-mark to hit a high of 26,054.37. Profit-booking towards the fag-end pulled the index down from day's high and it settle 161.82 points or 0.63 per cent higher at 25,778.66.
Out of the 30-share Sensex pack, 14 stocks ended higher. Prominent gainers from the index included HDFC, Maruti Suzuki, M&M, Coal India, L&T, HDFC Bank, Tata Motors, Infosys, BHEL, SBI, RIL, ONGC, ITC and ICICI Bank.
Sectorwise, BSE realty index gained the most by surging 1.99 per cent, followed by banking 0.90 per cent, auto 0.76 per cent, capital goods 0.65 per cent, power 0.52 per cent, IT
0.38 per cent and PSU 0.31 per cent.
In line with overall trends, mid-cap index rose 0.42 per cent but small-cap ended 0.11 per cent lower.
Global cues were largely negative on global growth worries amid a slowdown in China and uncertainty over the US Federal Reserve's actions.
Meanwhile, foreign investors sold shares worth Rs 650 crore on Monday as per provisional data.