The BSE benchmark Sensex surged as much as 1,720 points, hitting an unprecedented high of 76,795.31, while the Nifty 50 index touched an intraday high of 23,320, just 18 points short of its all-time peak. The surge came as the National Democratic Alliance members elected Prime Minister Narendra Modi as the leader of Lok Sabha, marking a major step towards the formation of the Modi government for the third consecutive term.

The Sensex ended 1,619 points higher to close at record high of 76,693 and Nifty 50 index surged 469 points to settle at an all-time high of 23,290.

Following a period of uncertainty post-election, the market regained its footing, fuelled by expectations of a stable government, robust domestic inflows, and an upward revision in economic growth forecasts by the Reserve Bank of India (RBI).

The recent three-session rally showcased a strong resurgence in domestic investor confidence, offsetting foreign sales. Clarity surrounding PM Modi's government formation over the weekend further bolstered market sentiment.

Meanwhile, in line with market expectations, the RBI announced an unchanged key borrowing rate and revised its full-fiscal GDP growth projection to 7.2 per cent from 7 per cent. Governor Shaktikanta Das stressed on its commitment to managing inflation and bringing it towards its medium-term target of 4 per cent.

The Monetary Policy Committee (MPC) opted to maintain the repo rate at 6.50% for the eighth consecutive policy meeting. While four out of six MPC members supported this decision, external members JR Varma and Ashima Goyal advocated for a 25 basis point rate cut.

On Dalal Street, all the major sector gauges compiled by the National Stock Exchange ended higher led Nifty IT index’s over 3 per cent gain. IT shares came under buying interest after major central banks started rate easing cycle with European Central Bank cutting interest rate by 25 basis points for first time in five years.

Auto, banking, financial services, metal, pharma, realty, and oil & gas indices also rose between 1-3 per cent.

Mid- and small-cap shares also witnessed buying interest as Nifty Midcap 100 index rose 1.5 per cent and Nifty Smallcap 100 index climbed 2.31 per cent.

Mahindra & Mahindra was top Nifty gainer, the stock rose 5.4 per cent to close at Rs 2,845. Wipro, Tech Mahindra, Infosys, Tata Steel, Ultratech Cement, Bajaj Finance, Bharti Airtel and LTIMindtree also rose between 3.5-5 per cent.

On the flipside, SBI Life and Tata Consumer Products were among the only losers in the Nifty 50 basket of shares.

The overall market breadth was extremely positive as 2,894 shares ended higher while 967 closed lower on the BSE.