Led by interest-rate sensitive stocks, the Sensex on Tuesday jumped by nearly 189 points to a one-month high of 17,601.78 on hopes of interest rate cut and slew of economic reforms after Finance Minister P. Chidambaram unveiled a roadmap to prop up growth.

After resuming higher in early trade, the BSE benchmark index kept on accumulating gains throughout the session as investors bought shares in auto, realty and banking sectors.

Sensex hit an intra-day day high of 17,641.55, its highest in 4 months, before closing at 17,601.78 -- 188.82 points or 1.08 per cent higher over Monday's closing. This is the highest closing since July 10 when it had closed at 17,618.35.

Smart rise in stocks including ICICI Bank, Tata Motors, TCS, HDFC, SBI, L&T and Bajaj Auto helped Sensex log over one per cent gains for the second day in a row. Brokers said IT stocks, including Infosys, rose after US-listed Cognizant stood by its full-year revenue forecast while interest-rate sensitive stocks rose after the new FM indicated a possible rate cut.

"Sometimes it is necessary to take carefully calibrated risks in order to stimulate investment and to ease the burden on consumers. We will take appropriate steps in this regard," Chidambaram said on Monday.

Speculation is on in the market for possible rate cut, said Nidhi Sarswat, Sr Research Analyst, Bonanza Portfolio. All sectoral indices closed higher, barring Oil& Gas and Consumer Durables. Investor wealth swelled by over Rs 40,000 crore to Rs 61.75 lakh crore on Tuesday as over 1,500 stocks rose.

The broader NSE 50-isse Nifty also flared up further by 54.15 points or 1.03 per cent to end at 5,336.70.

"The FM's statements regarding plans to reduce fiscal deficit and address tax concerns of overseas investors also drove the upsurge," said Sanjeev Zarbade, Vice President PCG Research, Kotak Securities.

Globally, Asian stocks finished modestly higher, extending gains from the previous session amid renewed optimism that the European Central Bank will take action to alleviate the Eurozone's debt crisis.

Barring Singapore which ended weak, key indices in China, Hong Kong, Japan, South Korea and Taiwan rose between 0.05 per cent and 0.88 per cent. European stocks were trading narrowly mixed. France's CAC and Germany's DAX were both by 0.39 per cent while the UK's FTSE was down by 0.27 per cent.

Back home, 25 stocks out of the 30-share Sensex family finished with gains. Major Sensex gainers were Tata Motors (4.42 pc), Gail India (3.21 pc), TCS (2.86 pc), Bajaj Auto (2.15 pc), ICICI Bank (2.08 pc), SBI (2.04 pc), Infosys (1.90 pc), Jindal Steel (1.74 pc), Tata Power (1.60 pc), HDFC (1.47 pc), BHEL (1.42 pc), Maruti (1.12 pc) and ITC (1.08 pc). However, Hero Moto fell by 1.37 per cent and Bharti Airtel dropped by 0.79 per cent.

Sun Pharma and RIL also ended lower. The total market breadth at the BSE remained positive as 1,522 shares ended higher while 1,285 scrips closed lower.

Among the sectoral indices, the BSE-IT rose by 1.95 per cent, followed by the BSE-Auto (1.70 pc), the BSE-TECK (1.58 pc), the BSE-Realty (1.53 pc) and the BSE-Bankex (1.20 pc). The total turnover shot up to Rs 2,178.92 crore from Rs 1,684.88 crore on Monday.

"We suggest PSU stocks could be in limelight as FM stressed on PSU stocks which means some of the PSUs may be able to sell their stakes before the closure of the year," said Kishor P Ostwal, CMD, CNI Research Ltd.

Meanwhile, Foreign Institutional Investors (FIIs) continued their buying spree by pumping Rs 555.73 crore on Monday as per the provisional data from stock exchanges.