The benchmark Sensex rallied over 1,600 points in afternoon session on Wednesday led by gains in index heavyweights Reliance Industries, HDFC twins, ICICI Bank and Kotak Bank as government took drastic measures to combat Covid-19 outbreak.
Shares rose 4 percent in mid-day trade on Wednesday, as US senators and Trump administration officials reached an agreement on a massive economic stimulus bill to cope with the fallout from the coronavirus outbreak.
Broader Asia shares advanced with MSCI's broadest index of Asia-Pacific shares outside Japan gaining 3.4 percent, said Reuters.
The NSE Nifty 50 index was up 3.9 percent at 8,103.05 by 0720 GMT while the S&P BSE Sensex rose 4.1 percent to 27,760.20.
"Gains in global markets are supportive and expectations of domestic stimulus have now gone up," said Neeraj Dewan, director at Quantum Securities.
Asian peers were also trading higher as authorities world over stepped up efforts to fight the pandemic.
After rallying 1,657 points, the BSE barometer was trading 1,573.02 points or 5.90 per cent higher at 28,247.05.
Similarly, the NSE Nifty was trading 444.30 points, or 5.70 per cent, up at 8,245.35.
Axis Bank was the top gainer in the Sensex pack, rallying up to 15 per cent, followed by Reliance Industries, Kotak Bank, ICICI Bank, Maruti, UltraTech Cement, HDFC twins and Bharti Airtel. On the other hand, ITC, ONGC and L&T were the laggards.
Despite the nation-wide shutdown, stock exchanges continue to function as usual. Indian financial markets have been battered in March as fears over the pandemic's impact on an already slowing economy sent investors into a selling frenzy.
India so far has reported nearly 500 cases of the virus and 10 deaths.
On Mumbai's main stock indexes, shares of Reliance Industries led gains, surging over 9 percent. A media report on Tuesday said Facebook Inc was in talks to buy a multi-billion dollar stake in the company's telecom unit Jio.
According to traders, in a highly volatile market, investors are weighing the economic impact of the 21-day lockdown announced last night.
In an unprecedented drastic measure to curb the spread of coronavirus, Modi said the lockdown will be in force from Tuesday midnight, as he announced a central allocation of Rs 15,000 crore to strengthen the health infrastructure to tackle the disease.
According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, enforcement of the 21-day lockdown of the nation will be a major challenge, PTI said
Ensuring supplies to all households is not going to be easy, but has to be done. The temporary shock to the economy will be huge, he said.
Nirmala Sitharaman, the Union Finance Minister said on Tuesday the government would soon announce a fiscal package to help the economy face the hit from the virus outbreak.
Volatility will remain in the short-term and will be driven by news flow, said Arun Kumar, head of research at FundsIndia.
Both indexes opened higher and fell over 1 percent in early trade before returning to positive territory.
The market is now awaiting a stimulus package for the financial task force, headed by Sitharaman, traders said.
Bourses in Shanghai, Hong Kong, Tokyo and Seoul rallied up to 8 percent.
Stocks on Wall Street rallied up to 11 per cent in overnight trade.
Global oil benchmark, Brent crude futures rose 1.62 per cent to USD 27.59 per barrel.
As per to the latest Union Health ministry update the number of coronavirus cases in India rose to 562, while the death toll due to this viral infection was revised down to nine from 10 after the second death in Delhi turned out to be negative.
The number of global COVID-19 infections has shot past 4,20,000. Worldwide fatalities have topped 18,000.