Equity benchmarks staged spectacular performance on Thursday with the Sensex rising nearly 500 points intraday on short covering after yesterday’s unexpected RBI action.Withdrawal of incremental CRR hike by the central bank, bargain hunting, weakness in dollar (& positive global cues) ahead of European Central Bank meeting due later today and renewed FIIs buying interest also boosted the market sentiment.

The market ended at almost one-month closing high. The 30-share BSE Sensex shot up 457.41 points or 1.74 percent to 26694.28 and the Nifty climbed 144.80 points or 1.79 percent to 8246.85, outperforming broader markets.

Analysts expect the upside might continue in near term due to underperformance of India compared with global markets but they don’t rule out extreme volatility or consolidation ahead of Federal Reserve policy meeting next week.

“While we see some upside in equities in the very near term as the Donald Trump trade unwinds somewhat, we anticipate a difficult H12017 as earnings momentum slows and valuations come under pressure,” says Mixo Das of Nomura who is overweight on India.

Jaspreet Singh Arora of Systematix Shares & Stocks says the implementation of GST in April 2017 along with other measures like a possible repo rate cut next fiscal by around 50-75 basis points and likely higher infrastructure spending and rationalising of taxes in Union Budget could help earnings growth back to double digit.

The BSE Midcap and Smallcap indices gained 1.5 percent and 1.3 percent, respectively. However, the gap between advances and declines narrowed as the day progressed. More than 2 shares gained for every share falling on the BSE at close, against the ratio of 5:1 in early trade.

European stocks were marginally higher as investors awaited an announcement from President Mario Draghi of the ECB on further monetary stimulus. Asian markets ended on a strong note after positive lead from Wall Street. Japan’s Nikkei, Australia’s ASX 200 and South Korea’s Kospi rose 1-2 percent.

Meanwhile, the rupee extended gains on dollar weakness, continuing a smart recovery from record low of 68.86 hit on November 23. It closed at 67.35 a dollar, up 28 paise from the last close.

FIIs net bought around Rs 400 crore worth of equity shares in previous two consecutive sessions.

All sectoral indices rallied more than 1 percent and Nifty Metal gained the most, up 3 percent followed by Auto, Bank, FMCG, IT, Realty and Pharma.

Nifty Bank climbed 1.5 percent as all stocks closed in the green. SBI, PNB, ICICI Bank and HDFC Bank rose more than 1 percent.

Tata Steel surged 4.6 percent after its US subsidiary reached an agreement with trade unions with respect to closure of pension scheme. Credit Suisse says delinking pension fund should pave way for Thyssenkrupp JV, which could take 6-12 months to materialise.

Tata Motors was up 3.6 percent due to solid JLR November sales growth in China & North America, and attractive valuations after 20 percent fall in November.

Sun Pharma climbed 1.75 percent on short covering after the US health regulator issued nine observations for Halol plant. The recovery in share price may also be on hopes that the company may be able to resolve these issues soon. However, the stock fell 6 percent in previous session on reports of 14-page observations letter to the unit.

Cipla gained 2 percent on final approval from the US health regulator for anti-hepatitis B drug Entecavir tablets.

Shares of ITC, Reliance Industries, Infosys, HDFC, L&T and TCS gained 1-2.5 percent.

Crompton Greaves shares fell nearly 6 percent after the company and Pauwels Spaco terminated share purchase agreement (SPA) for its international power business.