Efforts by Union finance minister Pranab Mukherjee to talk up the economy, coupled with continued strength in overseas markets, fired up stocks yet again on Wednesday.

Benchmark indices rose roughly 3%, extending gains to the second straight session led by institutional buying. Short-sellers in past weeks sell-off were forced to cover their positions amid rebound, further pacing upsides.

BSE's 30-share Sensex closed at 14,253.24, up 399.54 points, or 2.88%. NSE's 50-share Nifty ended at 4,233.50, up 122.10 points, or 2.97%. Both indices have risen 6-7% in the past couple of sessions.

Investors are divided on the market's near-term outlook, with a section betting that the bounce was just on technical reasons and a broader sell-off may be around the corner led by global events. Technical analysts do not rule out a decline in the Nifty to around the 2,600-level, if global markets turn weak hereon.

Some do not expect any sharp drop in the market. But, at the same time, they see limited gains from these levels.
"We think, the market will be in a range. While the government here is giving all the right signals in terms of policy framework, global cues are a bit negative," said A Balasubramanian, CIO, Birla Sun Life Mutual Fund. "The domestic factors will restrict any sharp fall, while global issues may cap the optimism."

The finance minister on Tuesday said fiscal stimulus measures were showing positive results and that the Budget deficit was key to driving economic growth. Indications of revival in the disinvestment programme has sparked some optimism that the deficit may not be as wide as projected in the Budget. The improvement in rainfall across the country over the past few days has also boosted confidence among investors.

On Wednesday, foreign and domestic institutions net bought Indian shares worth Rs 255.46 crore and Rs 272.97 crore, respectively, on Wednesday.

Outside India, though the decline in industrial production in the US in June was the slowest in the past eight months, triggering hopes that the worst could be over, investors are unwilling to conclude that the recovery is on track due to the high unemployment rate. The market is convinced that a global economic revival is unlikely unless more jobs are created.

Global markets on Wednesday were firm, with Asian and European indices rising 2-3%. American markets were up close to 2% at the time of going to press because of the lower-than-expected fall in industrial output there.